Bridging loans can serve as a good friend in need especially when sudden need of money arises. However, before you apply for a bridging loan you should gather as much info you can about this type of loan so that you are not misled by lenders. A bridging loan is a financial commitment quite significant in nature because you borrow this loan against a property which is held as your security. If you know thoroughly about bridging loans, you will be able to take a confident and informed decision. You can take bridging loans against real estate properties such as residential buildings, commercial buildings or mixed-up buildings. Those who borrow bridging loans against commercial or mixed-up buildings have to put it to commercial uses only. For whatever type of building, you are borrowing the bridging loan, it is essential for you to be the owner of the building to get this short term loan.
Bridging loans: Definition
Bridging loan is a short term loan taken on a temporary basis for bridging the gap between selling price of new house and the new mortgage of a home buyer under the circumstance that the home buyer’s house has not been sold out yet. The home buyer’s yet to be sold or existing house is held as a security against which the bridging loan is given. The bridging loan amount is then utilized to make the down payment for the move-up house. Since bridging loans, bridge the gap in the flow of cash in people’s hands, they are called bridging loans. The terms by which bridging loans are named are caveat and swing loans. Bridging loan rate is generally very high; it is around 12%-15%. But still these loans are increasingly becoming popular day by day because they offer quick easy money in times of financial emergency.
Bridging loans: Things you should know
Though a bridging loan rate is quite high when compared to ordinary mortgage, it still proves cost-effective because bridging loan is after all a short term loan; i.e. you will have to pay the rate over a much shorter period of time. This helps in raising finance in an extremely cost-effective manner. You should also take note of the fact that a bridging loan rate is calculated not on a yearly basis but month-wise. Bridging loans may be classified into two main categories: Open bridging loans and Close bridging loans. A closed bridging loan is borrowed under circumstances when the borrower has already signed a deal by means of which he will get back the money to repay the loan and simply waiting for the payment to be made; i.e. the money to come. Open bridge loans are borrowed when the borrower has not yet agreed to such sale of his property.
Bridging loans: An important tip
If you are planning to take a bridging loan choose a bridging loan lending bank or company that can be trusted and is reputed enough among its clients. It is best to opt for a bridging loan lending company that belongs to BFASA or the Bridging Finance Association of South Africa.
Bridging loan is an ideal short term loan that can fulfill your immediate requirements of money. This explains why these loans are gaining so much in popularity in the present times in spite of the high bridging loan rate.BBC - Blogs - Profile