Choosing the right financial tools when you need a little extra cushion to get what you want is one of the most important things to learn about personal finance, just as important as it is that company managers and entrepreneurs learn the commercial side. When it comes to home loans, most people are a little less aware of their options than they should be, though, and that leads to overpaying for loans that are a little bigger than they really need. If you are trying to raise some capital to deal with expenses that come from inheriting a property or being put in charge of the trust that owns it, the traditional mortgage designed for home purchasing just isn’t a good fit.
It’s a great loan when you’re buying, just not when you’re in probate. What you need instead is a real estate bridge loan, and there are several types of bridge loan financing out there.
Kinds of Bridge Loans
If you’re not familiar with it, the term bridge loan means a loan designed to cover short-term expenses, and it is typically given with the expectation of some kind of resolution. For example, many secured bridge loans for real estate are designed to provide funds and time for properties to be rehabilitated before they are either resold or refinanced into traditional fixed rate instruments.
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That type of loan is particularly popular with investors flipping properties and homeowners looking for a deal on a house that needs a little love. They are secured with the property’s title, so if the borrower defaults, the private lenders typically foreclose to recover their investment. The terms for these loans are short, and sometimes there are restrictions on the lending.
Another option, one that is often used as a way of obtaining an estate loan while in probate, is the real estate hard money loan. This is a popular instrument with both borrowers and private money lenders for real estate because this kind of loan is very flexible, with options for secured and unsecured lending in the market, and the money can be used flexibly. Like other bridge loans, the terms are typically short, but the payment structure is often flexible.
That means depending on your lender, you could make installment payments against the total to avoid a large end payment, or you could opt for interest-only payments with a single payoff of the balance at the end of the term. Often the choice is yours, but sometimes a program has solid reasons for limiting their offerings. Asking about the options available from a lender can help you understand these choices better.
Which Home Loan Is Right For You?
If you’re looking for a loan to cover the probate period on a property or to help take care of taxes and other expenses while it is put on the market, you should find out more about your hard money options. Other types of bridge loans and longer-term home loans are usually built for other purposes, but hard money lenders have experience working with borrowers that have needs just like yours.
