N.Y. Mortgage offering bridge loans for homebuyers

Real Estate Weekly, Sept 4, 2002

Continuing its expansion of products, services and geographic coverage, The New York Mortgage Company LLC, has introduced bridge loans for homebuyers who want to close on the purchase of a new home but haven't yet sold their current residence, announces Steven Schnall, president.

Bridge loans, which are common tools in commercial real estate, are relatively rare in the province of home financing.

"We think the time is right for this product," says Schnall. "We've found that a significant percentage of homebuyers in the current market face the prospect of missing the opportunity to buy the home they want because they lack sufficient cash to close without selling their current residence. That's when a bridge loan can provide an efficient solution.

He cautions, however, that bridge loans are worth considering only when the current home is easily marketable. "What you don't want is to wind up carrying mortgages on two homes for any length of time," he says.

Interest rates on bridge loans vary, although they are generally higher than for conventional first mortgages. The term is usually for up to one year, and typically the loan is repaid within several months.

According to Joseph V. Fierro, chief operating officer of New York Mortgage Company: "Bridge loans are another example of the kinds of products demanded by today's more sophisticated consumer. Homebuyers are looking for more options and greater flexibility in financing. For instance, we're seeing greater demand for interest only loans and a wider range of adjustable rate products."

Recently, NYMC introduced jumbo mortgages pegged to the London Interbank Offered Rate (LIBOR), enabling homeowners to obtain adjustable-rate loans with current rates of less than three percent. Although the loans are subject to frequent adjustment, there is no prepayment penalty for borrowers who wish to switch to a fixed-rate loan.