The nature of Bridge loans
Lack of well defined standards on such issues as debt-income ratios by many financial institutions make it difficult for borrowers to benefit from short term financing. This is because borrowers who have existing mortgage obligations are excluded from entering into any financing for a home until they finish their current obligations. However, bridge loans exist to abolish such notions and instead consolidate any pre-existing mortgage to the one advanced for acquiring the new home. There are a number of reasons why many borrowers are co-opted into a second loan despite having an existing loan.
The existence of an existing mortgage can be consolidated with bridge loan so that it becomes one loan. This enables the buyer to acquire a new home against their asset-the house.
The house serves as a security in the sense that they will not be able to sell their old house until they complete the payment of the existing loans.
The buyer will be presumed to own both the old and the new home is not an investment risk.