Guide to Bridging LoansWritten by John Mussi
Here is a useful guide to bridging loans. This is a loan that is usually taken out to solve a temporary cash shortfall that may arise when buying a property or business. It's basically a very short term mortgage. Like a mortgage, it's a loan that is "secured" against property. A bridging loan is a type of loan that is used to cover shortfalls between buying one property and selling another. A prime example of when you might need a bridging loan would be if you're ready to buy a new home but are let down on sale of your existing one. To secure your new home, before it goes to competition, you could use a bridging loan. A bridging loan is a short term mortgage which is secured by your property. This is usually arranged by getting a mortgage on new property, and taking out a second mortgage on property being sold. This type of loan is mainly available for house sales and is usually taken out to solve a temporary cash shortfall which can happen when selling and buying different properties or to pay for renovations. It 'bridges' gap between purchase of a new property and sale of an existing one. The bridging loan allows you to borrow over a short term which you can pay back as soon as you have sold your home. Because of short-term nature of loan however you should expect to pay more interest and higher fees than with a long-term loan. You can also use a bridging loan to purchase properties at auction, fund short-term commercial or residential renovations, and to safeguard a property purchase if mortgage is delayed. A bridging loan can be extremely flexible. In case of buying property, a bridging loan is normally secured by getting a mortgage on new property, and taking out a second mortgage on property being sold. This can be most cost-effective way to fill gap that can sometimes occur between buying and selling your property. Due to being only a short term loan, Bridging loans are usually sold at a higher rate than a conventional mortgage.
| | Why Choose a Bridging Loan?Written by John Mussi
Listed below are some of reasons for choosing a bridging loan. A bridging loan is a short term mortgage which is secured by your property. This is usually arranged by getting a mortgage on new property, and taking out a second mortgage on property being sold. In effect, this type of lending is a kind of mortgage. It is secured on your home, but without low interest rates usually associated with a mortgage. You must be aware of risks associated with this. If you fail to sell your existing home, there is a chance you'll have to sell your new home just to pay off lending. Probably most common use of a bridging loan would be connected to buying a property. A bridging loan gives you an agreed amount to help you bridge gap between selling and buying your property. Being self employed or having an adverse credit history or CCJs need not be a problem. A bridging loan can even enable people who have an adverse credit history to build a track record before applying for a conventional mortgage. A successful bridging loan can have a positive effect on a borrower's credit score making future finance more attainable. Bridging loans can be used to purchase properties at auction, fund short-term commercial or residential renovations, and to safeguard a property purchase if mortgage is delayed. A useful feature of bridging loans is that client can repay capital at any time, thus reducing outstanding balance and monthly instalments. A bridging loan can be used for a variety of purposes such as: To enable purchase of one property before completion on sale of another.
|
