web stats

Bridging Loans Explained And Their Benefits

The bridging loan has become something of interest in the last few years. In fact, you’ve probably heard about them at one time or another and thought to yourself, what’s that?

bridging loan
bridging loan

Bridging loans are a kind of housing loan. These loans are for those who have just had an offer accepted on a new home, but having some sort of issue with selling their own current home and are afraid this may cause the deal to fall through.

In essence, these loans are there to tide you over for a short period of time when you sort out the sale of your house. They allow you to buy the new house before you’ve sold your old one.

Kinds of Loans

There are two different forms of bridging loan and the one you decide on, will depend on the situation you’re in.

  • Closed Bridge – this form of loan will be offered when there is a guaranteed exit already set up i.e. there is a long term funding already decided. Because of the nature of mortgages and property sales and the risk they may fall through, this closed bridge is less common. This form of loan is ideal for those that have made the ‘exchange’ as few properties fall through after this point.
  • Open Bridge –  This is a more common sort of bridge loan and is used where there is nothing certain as regards finance. This will be the case where there is no long term finance. It is usually a fixed period loan. Borrowers also require a large amount of equity in their current home in order to secure a loan like this.

Benefits of bridging loans

Tight Place – If you’re in a tight place and need the finance for the new house quickly, but are still waiting on the sale of your own house due to some issue or other, then bridging loans are ideal. These loans allow you to secure your new home.

Speed – A bridging loan is usually quickly issued and arranged. Depending on the company it can be sorted within a matter of days. This allows people the opportunity to purchase their new home quickly and without the risk of the deal falling through.

Flexibility – There are a number of flexible options with loans like these and it’s possible to pay off a loan like this as soon as you are able to. Interest retained options allow you to wait until the whole loan is repaid to repay the interest.

A bridging loan can really have its benefits and can take you out of a tight corner if needs be. These kinds of loans offer you a fast and affordable form of finance that ensures you can overcome any issues and get the property you want.

Home Financing with a Bridging Loans Company

Moving on to a new house is often stressful and physically draining. There are plenty of things to think about and manage, so most people find the whole process very overwhelming. To make matters worse a small financial issue can quickly derail the process of moving home and cause even more stress.

Apply for bridging loans here can help you move home from your old property to a new one, fast?

Typically you would sell off your old home first, and then make use of the fund from that sale to purchase a new home. However, it can take quite some time to locate and finalize a buyer, and all the time the property you are after could be snapped up by someone else. This means unless you are very lucky, the timing of these two transactions won’t match in the way that you need.

Imagine you had only a couple of weeks to send the down payment for a new property and this doesn’t give you enough time to apply for a more traditional type of loan. The ideal way of dealing with this situation is getting short term finance with a bridging loan.

Usually, a bridging loan is a bit of a risky option, but once you find and commit a buyer for the old property it becomes a great choice. Now you can be sure of having a good source of funding to pay back the full loan amount in short order.

By utilizing a valuable asset such as your home, being accepted is not difficult at all. Other factors such a past credit history, won’t be a major concern for loan providers in such situations. As the collateral you can offer reduces the risk for the lender.

Do make certain that any such short term secured loans have terms and conditions that are suitable for your needs and requirements. Also, it is a very good idea to have a reliable plan on how you will be repaying the loan, so a reliable source of income or funding is highly recommended.

Bridging finance can also be used when dealing with the sale and purchase of offices, flats, land, factories, shops and any other type of commercial property.

A business that has a need for expansion of its services or needs to move offices can also benefit from bridging loans to close any cash gaps.

An important factor to consider is that these loans are only suitable for a temporary solution to avoid cash flow issues in the short term.

If there is ever a need to take out this kind of loan too often, then there is a much bigger financial issue that should be resolved as quickly as possible.

Loans are available in two main types. There are open bridge loans and also a closed bridge loan. Search online to find some reputable companies and to get the best deals and terms.

Read also: Fast And Varied Options To Get A Loan

Leave a Comment