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December 31, 2018

Bridge Loan

Word of the day

Bridge Loan

1.    Short-term loan to cover the period between the termination of one loan, such as an interim construction loan, and the beginning of another loan, such as a permanent takeout loan; the loan between the acquisition of a property and its improvement or development to make it qualify for a permanent loan. A bridge loan is sometimes used to provide funds for the costs incurred in converting an apartment house into a condominium. (See gap financing, swing loan.)

2.    A residential financing arrangement in which the buyer of a new home borrows money and gives a second mortgage on the buyer’s unsold home to fund the acquisition of a new home. This loan is useful where the seller of the new home will not accept an offer “subject to the sale of the buyer’s home” or where the buyer needs to raise the down payment by a certain date or else lose the new home.

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