Do you wish to purchase a new house but are yet to find a potential buyer for your existing property? What if you do not have enough funds to proceed with the deal? You need not worry anymore, you can potentially bridge this funding gap by opting for bridging loans and move into your new address with peace of mind. Like you, many home buyers prefer this particular type of loan due to its multifarious benefits. There are people who have a misconception about it and may guide you against opting for it. However, you can rest assured that many people have successfully completed residential and even commercial transactions with bridging finance loans.
What are the Features of Bridge Loans?
Bridge loans are referred to as swing loans and have the following features:
- You can avail it for almost all kinds of mortgages and funding is made available almost instantly.
- You only need to make interest payments while waiting for your old house to be sold.
- You can usually get up to six month’s window period to pay back the principal amount on completion of the property sale procedures.
- You even have the option to cover interest in advance to avail of additional advantages.
How Do Bridge Loans Work?
Well, lenders typically offer bridging loans only to prospective borrowers. You have to have an excellent credit rating. You should also have a low debt to income ratio. You must keep in mind that the lender will offer you a loan amount worth 80% of the total value of your existing house and/or the property you want to buy. You still have to arrange additional funding to cover the amount left-over, not funded by the bridging finance (if applicable) in order to buy the new property.
The difference between Traditional Loans and Bridge Loans?
The following are the basic differences between traditional and bridge loans:
· The loan is processed faster in bridge loans than in any traditional loan.
· Term of loan is much longer in traditional loans than that of bridge loans.
· Most bridging loans do not have any repayment penalty which is often applicable in traditional loans.
What are the Benefits of Bridge Loans?
You can enjoy an assortment of benefits of bridge loans as follows:
- You can get funds quickly to purchase your new dream home, as it can be arranged within a few days and at very short notice. It is like a bridge that fills in the cash gap between moving into your new house and selling out your existing house. You can move into your new house while your old house still remains for sale in the market.
- You can borrow as an individual or as a representative of a corporate house and use the fund for purchasing any personal property or other property related financial purpose.
- In case you are bidding for a house in an auction the bridging loans may be of a great help as you can bid with confidence and assurance of the amount that you have available.
- These loans are secured loans, as you have to put a property of some kind as a security. You can put your vacant land, residential or commercial property and any other property registered on your name, as a security for the amount you are taking.
- You can find many lenders who offer amazing payment schedules on the basis of your financial credit.
- These type of loans demand only interest payment from you during the period of the loan term. You are supposed to pay back the principal amount after you complete the sale transactions of your existing property.
Bridging loans are a great vehicle to access funds quickly while waiting on your long term mortgage to kick in.