I think the most common usage in personal home buying is to get from closing of your new home to the closing of your existing home.
Usually you want to close on your purchase of a new home a bit earlier then you close on the sale your existing home so that you (1) Have a place to live (2) can do a single move instead of a double move.
The down side is that you can't transfer the equity of your current home to your new home. Bridge loans get you over this gap with small risk so the price isn't to much. You basically get a separate loan for your current house's equity that is paid off at closing.
The issue would be if the sale of you current home fell through for some reason, hence the issues in 2008 when there were so many unsold homes on the market.
I should have been more clear. The housing bridge loans I'm talking about were for first mortgage, on SISA, and pushed by LOs. They really stretch the borrower.
The case you describe also happens, I'm just talking about a different case.
> Oh, I remember when these were popular for dot-com who just needed to get to the next round.
One of the best skills to learn is when to stop throwing good resources after bad. Sure, maybe you need just a little more to get over the finish line, but more than likely you are just investing more resources into delaying failure.
People often bring up Elon Musk and Tesla as a positive example of perseverance, where he was apparently sinking personal money to keep the company alive. It did pay off in retrospect, but there was a very large chance it didn't - and we're just celebrating survivor bias.
> Edit: Bridge loans were also really popular to stretch home buying power in 2006,2007. Hmmm.
You wait, this bubble is about to pop. Not a great time to have large financial obligations. I suspect this will make 2008 look like nothing (people weren't struggling to fuel their cars or eat then).
> You wait, this bubble is about to pop. Not a great time to have large financial obligations.
The people buying these houses have good financial means, when I bought in 2021 the bank looked through all my finances in depth, and they were super conservative about everything.
For example, I own an existing townhome, before agreeing to give me a new mortgage, the bank made me show a signed contract with a tenant for my townhome to demonstrate the townhome wouldn't be a financial burden.
At least in the city I live in, Seattle, the housing supply is so obscenely constrained that only people who can go above and beyond to show they can pay, are even being granted approvals by the banks.
After every crash, people make fun of all the folks that said "this time is different". Maybe that will happen again. And maybe not - or maybe there is no crash at all.
I, for one, am truly perplexed. Some things look awful and some things look great. If there is a crash, perhaps it will provide clarity so we can look back and say "it wasn't any different this time".
The last bubble was obscene. 5:00 news talking about how many houses you should buy. This time around everyone who's buying is either paying cash or has had their income verified as being a large multiple of their loan amount.
A lot of tech stocks had a huge explosion in value and I've seen a lot of people locally sell off and just pay the whole house off at once. They aren't cash flow rich but $800k down on a 1.5 million house puts their mortgage payments at a reasonable level for a couple earning 300k+ a year.
I live in a state with all public records and it's very easy to just take a look at house sales and find out who bought them. Basically people who work at companies that had large increases in stock value.
>You wait, this bubble is about to pop. Not a great time to have large financial obligations. I suspect this will make 2008 look like nothing
While I agree that a bubble is about to pop - I disagree with comparisons to 2008.
My personal take is that the current recession and impending pop will be for reasons different from 2008 - we have been making different mistakes. I also believe that 2008 was really big and I'm not certain the impending pop will be really big - just kind of big.
Gas and food prices would likely drop like a stone if we are facing another 2008-like crisis.
A handful of people made a big bet that during the credit crunch we’d see massive inflation and took big bets against the dollar and cheap oil and lost their shirt
> Gas and food prices would likely drop like a stone if we are facing another 2008-like crisis.
Not necessarily. For deflation to occur, especially in staple goods (for which demand is sticky) in addition to stable or contracting money supply (M2) you need significant supply side growth. Neither is certain. I personally doubt that politicians will hold the purse closed at a time when lower and middle income voters are stretched thin. Deflation-causing policies also tend to lower tax revenues.
My bet instead is that crisis or not we will likely see debt deflation via below inflation interest rates. Just a personal position, I do not have a crystal ball.
Many did not. And a loan has baggage that equity doesn't.
Edit: Bridge loans were also really popular to stretch home buying power in 2006,2007. Hmmm.