How Can a Bridge Loan Help Me?

A Good Fit: Construction and Bridge Loans
Buying or building a home is a fun, exciting process. Certain situations require more knowledge and planning, such as building a new house or buying a new home while trying to sell your old one.  People in these circumstances may need to turn to special types of financing: a construction loan, or a bridge loan. USUCCU is equipped with the knowledge and programs to meet these needs for you. Here are a few pointers on using these two types of very helpful loans:

Construction Loans
Construction loans work a little differently than most types of loans. Rather than issuing the entire loan amount at once, the lender pays out funds as the construction moves along.

USUCCU sets up the construction loan for you, which usually has a six-month to one-year term. During that term, the borrower pays only interest, and the principal is due in a lump sum at the end of the term. The interest payment can be drawn against the construction loan to ease the pressure of making an additional payment during the construction period. The borrower then applies for a long-term mortgage loan. The long-term loan has a lower interest rate and is paid over a longer period of time to keep payments low and within budget.

Bridge Loans
Say you're selling your house and buying a new one. But the sale of your existing home won't close in time for you to use those proceeds for a down payment on your new home. This is where a bridge loan comes in.

You could use a bridge loan in one of two ways: Borrow enough to pay off your old mortgage and cover the down payment for your new home. Or leave your existing mortgage in place (continuing to make monthly mortgage payments) and borrow against the equity in your existing home to pay the down payment for your new house.

A bridge loan is for a short term, say six months. Usually you make no payments on the loan during that term. You pay off the accrued interest and the outstanding balance on the bridge loan when your old house sells.