A bridging loan may be referred to as the facility of providing funds for buying a new home while the existing one is sold but its settlement would not take place until purchase of the new home. Large bridging loans are meant for purchasing large homes while those interested in buying smaller apartments may choose smaller amounts of such loans. Candidly, bridge loan financing is the unique method of applying the net equity in the existing home as a down payment for the new apartment prior to realization of the equity. Such facility of loan is able to relieve you from the timing pressure for moving immediately from the old house to the new one on the closing date. This can be postponed for few days with the facility of bridge loans that are a great boon.
Bridge loan working and payment – Those interested in such loans must understand their working. Your existing house is utilized as collateral for the bridge loan financing that you intend to raise for the new accommodation. Many times such new homes may be lien marked. One week to twelve months is the usual term for bridge loans. Those raising such loans have to pay the principal and accrued interest in full upon sale of the old house and its settlement. Facility of monthly interest payments during the term of loan is also allowed. Short-term loans can be repaid in full after sale of such homes. Copies of the sale agreements are given to the financial institution for verification of the settlement of the existing homes. Sales contract must be reviewed for determining that the same is free from any contingency.
Persons raising any amount including large bridging loans must know that they have to pay the following during the term of the loan:
- Mortgage for the new home
- Accrued interest on the bridge loan
- Remaining mortgages and / or home equity lines or loans on the previous residence; if any.
Benefits of bridge loan financing – Such loans are meant for amateur property developers and landlords and the ones that purchase properties at auction where quick mortgage is needed. Asset-rich or wealthy borrowers that wish clear cut lending on residential properties are greatly benefited with such finances, whether small or large bridging loans. Facilities of such loans can be availed for buy-to-let, development and property investments. Many borrowers consider such loans as simple alternatives to mainstream financing.
Such loans are available in different shapes and sizes. The persons that think of availing the same must think carefully about their specific needs before going ahead with the same. The relevant banks or other financial institutions must be contacted for necessary guidance and details in this regard. They are the right people to provide the needed information about such loans that are meant for easy finance for buying new houses till the settlement of sales of the existing ones. One should consider his or her repaying capacity too before availing such bridge loan financing.