Bridge loan is an effective vehicle which is used until the permanent financing is put in place. It is a financing secured by a borrowers current home and is used to finance the purchase of a second home. It is also known as swing loan, gap loan, or bridge financing.
Features of Bridge loan:
- Short term loan – It is a short term loan, usually up to one year.
- High interest rates – It offers higher interest rates.
- Gap bridging – It bridges two different types of cash gaps.
- Expensive – It is expensive since it is intended for a very short period.
- Equity usage – Here a borrower uses equity on his current home for securing finance for his second home.