According to the California Real Estate statute, a Residential Bridge Loan is one made expressly for the purpose of assisting a borrower in the purchase a new home he intends to occupy using their current home, and if necessary, the new home, as security for the loan.
There are specific statutory restrictions associated with a bridge loan. For example, the bridge loan cannot exceed 12 months in duration. In addition, the bridge loan cannot contain a prepayment penalty of minimum interest charges.
Why Obtain a Bridge Loan?
Considering some of the restrictions placed on bridge loans, you may be wondering why a buyer would even want to apply for a bridge loan, especially when it is typically more expensive than a traditional mortgage. Well, the answer can be found in today’s red hot real estate market. Currently, the residential real estate market is both short on supply and in high demand from prospective buyers. Hence, it is commonly referred to as a “seller’s market.” In this environment, the competition is fierce between buyers and may even result in a buyer offering to pay “all cash” for the property and close very quickly. This puts a buyer who needs to sell their current home before having the funds to close on a new purchase in a major disadvantage since they would need to make an offer on a new home contingent upon the sale of their current home.
Even if you have a seller who is sympathetic to the prospective buyer’s situation, they will most likely wind up accepting the all-cash, fast-close offer. It is in this scenario where a bridge loan can provide a tremendous value to a home buyer.
To illustrate the benefits associated with a bridge loan, consider the scenario of one of our clients – they owned a home that was in the process of major renovations. While the renovations were on-going, the client’s “dream home” came on the market. To be considered a viable buyer, the client needed to make an “all cash” offer combined with the ability to close quickly (i.e.,within 3-4 weeks) in order to compete with other offers.
In this situation, a traditional mortgage would have been much more complex and too time-consuming to be of any assistance to the client. A traditional mortgage certainly would not have put them in the best position to be the successful bidder for their dream home. Instead, the client took out a bridge loan,adding to the cash they had available; thus, were successful in purchasing their dream home. Were it not for the bridge loan, they may have fallen short, and ben forced to witness their dream home being sold to another.
Have Questions About Bridge Loans in Los Angeles? Contact the Reputable PB Financial Group Today
If you have questions about bridge loans in Los Angeles or any other issues associated with hard money loans, PB Financial Group is here to help. PB Financial Group is a premier direct hard money, private money, and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans.Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner. To learn more about how to finance your next real estate venture, please contact PB Financial Group, at 877.700.3707 to schedule a consultation or visit www.CalHardMoney.com to learn more.
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