A bridging loan is a financing option for buying property. It fills in the gap between the sale of your old property and the purchase of a new one, acting as a ‘bridge’. This leaves you with enough money for the moving process as you transition from one home to the next. You might think that your only outgoing will be your new mortgage, but you also need to budget for things like estate agent and removal costs. There may also be hidden costs, with some utility companies charging to transfer your details to your new address. Depending on how much you have to move, you might want to book a moving company early to avoid high fees. A removals company like these movers in Rockville might be an option if you live in the Rockville area, for example, so book early to get an idea of how much you need to set aside for moving costs. A bridging loan is only meant for that short period between moving out of your old home and into your new one, so for this reason it is considered a short-term loan.
Why Choose a Bridging Loan
One of the significant features of a bridging loan is that it is a short-term financing option. This makes it more expensive compared to other financing options. However, the benefits can be worth this higher stake in price which is why you may want to consider searching Bridge Lender Colorado for more guidance.
For starters, a bridging loan is easier to get than a mortgage. For example, unlike mortgage lenders, bridging loan lenders do not require proof of affordability. This makes it a much more accessible choice of financing. While there are options for people when it comes to finding the right mortgage, like veterans who can apply for a VA loan with help from websites similar to The Wendy Thompson Team, often bridging loans are a good alternative. Companies offering bridging loans also tend to be smaller than mortgage companies. This makes them more flexible with terms and conditions and can easily adjust to your personal situation.
Acquiring a bridging loan is also much faster. This is because the conditions needed are not as painstaking as those needed for a mortgage. There is therefore less bureaucracy and paperwork to fill. They can be convenient in matters of urgency. Imagine a situation where you have bought a house or any kind of property at an auction for re-selling. The process of arranging a mortgage would be too slow. A bridging loan would then be a better option where you can get one to buy the property as soon as you can and pay off your loan after re-selling it.
Sometimes it can be difficult to find a buyer for your property. If for any reason there is pressure to move to your new home, a bridging loan would be then suitable because it would allow you to buy your new house and repay the loan once the old one has been sold. If one is to take the traditional route of a mortgage, you would have to sell your old house first to get financing for the new one. This can also help if you are planning on conducting renovations on your old home when you move to your new one as you may need the funding to move without having to stay during the renovations, so whether a multi zone mini split AC installation is happening throughout the home or a new room addition is being built, there is less stress with no need to stay within the home, it can then be ready to be sold on with added value when completed.
Another reason why you might want to consider a bridging loan is because of the exit fees. A mortgage would attract fees or penalties if you intend to repay it before the end of the agreed time. This could be particularly inconvenient if you happen to come upon some money before then or generally want to put it behind you as soon as possible. Bridging loans do not come with these conditions. If you can clear the fee before the end of the time agreed than all is well.
Finding a Bridging Loan
These conveniences among others are what make bridging loans a more lucrative option, even if they are more expensive than mortgages. How then, do you get one or identify a good provider?
The first thing you need to do is identify the kind of bridging loan that you need. There are two main types of bridging loans: closed and open bridging loans. A closed bridging loan has fixed dates for repayments. An open bridging loan on the other hand has no fixed repayment dates but has a duration which is usually one year.
Many banks and mortgage brokers offer the option of bridging loans. They are not difficult to come by. The internet also offers a rich source of where to find them with some websites giving comparison tools and great advice on which loans to chose. So even if you are not familiar with the concept, it is an easy-to-understand and direct process.
Bridging loans offer the convenience of meeting cash-flow needs and the urgency of moving from one place to another and have fewer limitations compared to mortgage financing. It is however important to have a solid repayment plan because they are more expensive.
