Bridge Loan Rates Today: What You Need To Know

Bridge loans can be an important financing tool when you need to move quickly between homes. But like any loan, the interest rate and fees make a big impact on the overall cost. Here’s what borrowers need to know about current bridge loan rates and how to get the best deal.

What Are Bridge Loans?

A bridge loan provides short-term financing to “bridge” the gap between buying a new home before selling your old one. These loans are usually secured by your current home as collateral and must be repaid quickly, often within 12 months.

Bridge loans allow you to buy a new house even if your current home hasn’t sold yet This helps in competitive markets where sellers may not accept contingencies The loan provides the down payment funds so you can move forward with purchasing the new home,

Bridge loans typically have higher interest rates and costs compared to longer-term mortgages. But they can be an important tool for some home buyers who need flexibility during the moving process.

Current Bridge Loan Rates

Like other types of loans, bridge loan rates fluctuate daily based on market conditions. According to Bankrate, today’s average bridge loan rate is around 10% to 12%.

However, actual rates can vary significantly depending on the lender, your credit score, the loan amount, and other factors. Some key points about current bridge loan rates:

• Prime Plus Pricing: Most lenders base rates on the prime rate, currently 8.5%, plus a margin of 1.5% to 3.5%. So you’ll usually see rates of 10% to 12%.

• Higher Credit Score = Lower Rate: In general, borrowers with credit scores above 700 can qualify for the lowest rates, while scores below 620 may mean paying the maximum rate.

• Jumbo Loans Cost More: Loans over $500,000 are usually considered jumbo loans and may have rates 0.25% to 0.5% higher.

• Shorter Terms = Lower Rates: A 6-month bridge loan may have a rate up to 1% lower than a 12-month loan. But this means faster repayment.

• Variable Rates: Some lenders offer variable-rate bridge loans tied to the prime rate. This brings some risk that your payments may rise.

Ways To Get The Best Bridge Loan Rate

As you shop around for bridge financing, keep these tips in mind to help secure the lowest rate:

• Check your credit score. Getting your score above 700 can make a big difference. Paying down debts and correcting errors on your credit report can give your score a boost before applying.

• Ask about discounts. Many lenders reduce rates for existing customers or if you also get your mortgage through them. Loyalty discounts of 0.25% are common.

• Compare multiple lenders. Checking rates from 3-5 lenders makes it easier to find the best deal. Online lenders sometimes offer lower rates than banks.

• Favor shorter terms. Even if it means a tighter repayment timeline, loans of 6 months often have the lowest interest costs.

• Watch the fees. origination fees and other charges vary greatly by lender. Avoid paying “points” to buy down the rate unless you can recoup the expense quickly.

• Use your home’s equity. Lenders may offer better rates if you have at least 20% equity built up in your current property.

• Ask about variable rates. If you can qualify, a variable rate tied to the prime rate could start out lower but does carry some risk.

Alternatives To High-Rate Bridge Loans

If you want to avoid high interest costs, here are a few alternatives to bridge loans that may make sense:

• Home equity loan – Typically lower fixed rates and you can borrow in a lump sum amount. But it takes more time to apply and get approved.

• Cash-out mortgage refinance – Tap your home equity by refinancing which can provide funds in about 30-45 days. Existing equity and good credit help get better rates.

• HELOC – Functions like a credit card with rates starting lower but some risk they rise over time. Usually takes a few weeks to close.

• Personal loans – Unsecured so no home collateral needed. But maximum loan amounts tend to be lower, around $100k.

• Business line of credit – Interest accrues as you draw funds. Terms up to 10 years but can be tougher to qualify for.

How Much Does a Bridge Loan Cost?

In addition to interest rates, bridge loan costs include origination fees charged by the lender, usually 1% to 5% of the total loan amount. There are also closing costs such as appraisal and title fees. Overall expect to pay $2,000 to $10,000 on a $200,000 bridge loan.

It’s important to consider these fees and factor them into the total cost along with the interest rate you pay. A loan with a lower rate but higher fees could end up being more expensive overall.

Finding The Right Bridge Loan

As you can see, bridge loan rates and terms can vary significantly from lender to lender. While they fill an important role in competitive housing markets, make sure you shop around for the best rates and know all the costs involved. Doing your homework can help you save thousands over the short loan term.