When Rick Robertson, president of Mortgage Mentor, was researching his new software module - a tool to help brokers navigate lender policies for financing rental properties - he realized there was a broad misunderstanding of two types of loans.
"When it comes to residential mortgages, there is a lot of confusion about the terms 'bridge loan' and 'interim loan,'" said Robertson. "As we research our upcoming mortgage tool, we are finding that many agents, brokers and lenders alike have a total misunderstanding that these are two different products."
Robertson's findings led him to publish a brief explanation of each type of loan, something that will be incorporated in the new Mortgage Mentor module due out in September. He defines bridge loans as financing required to help someone buy a new residence where there is a firm contract for purchase and a firm contract for sale and the purchase occurs at an earlier date.
"For those of us who prefer visuals, imagine two contracts connected by a bridge named 'financing,'" Robertson says.
Interim loans are a similar concept, except there is no firm sale agreement in place for the present property, even though a new purchase has been finalized. Robertson said these types of loans are growing in popularity in the current market.
"People are getting anxious about buying and think they better make an offer before they've even sold their other house," he said. "They need these loans to carry them over."