Buying a home requires a great deal of planning, both financial and otherwise. All of the hard work and difficult decisions involved in such a purchase eventually culminate in a single event -- the closing. For those people closing the sale of one property and purchase of another on the same day, an element of risk is involved. One of the ways to reduce such risk and the associated stress is to apply for bridge financing.

The risk with selling one property to buy another on the same day is really a monetary one. Such a risk becomes apparent if the sale is delayed. Most people need the proceeds from the sale transaction to be able to complete the purchase transaction. If the closing of your sale is delayed, the closing of your purchase also will be delayed. Getting a bridge loan can solve this problem. It allows a home consumer to buy first and close second.

Many consumers do not understand the complexities of the home closing process. This process is complicated when the proceeds of the home being sold are needed to close a purchase transaction on the same day. Matters become even more complicated when the sale and purchase are being closed in two different registry offices on a busy closing day.

Delays in closing are frequent and often unavoidable. When this happens, there is little that can be done. Unfortunately, however, a delay in closing the purchase of your new home can cost you time and money. When a delay occurs, movers sit around idle but fully paid, unable to move your possessions into the new home without a key. Other service providers like telephone or cable employees, as well as tradesmen, may be similarly stymied.

One way to relieve closing day stress is to buy first and sell second. This can be done with a bridge loan. Here’s how it works: To avoid the risk of sale and purchase closings that take place on the same day, advise your realtor to structure the dates in your contracts so that you purchase first and sell a day or two later. Then go to your financial institution to seek a bridge loan. The bank will ask you to apply for the loan and sign some paperwork. If the bank agrees to give you a bridge loan, it will loan you the money you need based on the proceeds you will receive once you sell.

Like any other loan, your financial institution will charge a fee for bridge financing. The cost of the bridge loan will depend on the amount of money you require and the length of time you need to pay it back. Be sure to advise your lawyer if you obtain a bridge loan. Once aware of this, your lawyer will ensure that the proceeds from your sale are delivered to your financial institution as soon after closing as possible to pay off the bridge loan.

The benefits of a bridge loan are obvious. Consumers can close their purchases with more certainty, as they are not reliant on the sale of their former home to close first. Additionally, they can plan their move with more certainty, allowing their family to feel more settled during a very busy time. The only downside of bridge financing is cost, but considering the benefits that a bridge loan offers, its associated cost is quite reasonable.