As the name suggests bridging loans help bridge the funding gap that individuals face between selling their property and buying another.
These loans can also be borrowed when you need funds for renovating a property that you are about to sell. Following are the advantages of bridging loans for homebuyers:
They are short-term loans. Mostly, you will have to repay the loan within a year. This benefit keeps the burden of repayment low on the borrower. Otherwise, in other loans, with a longer repayment period, you are to pay interest many more time and lose more cash.
The amount in a bridging loan is not capped. Meaning, you could ask for as much money as you need for meeting the gap. However, as the interest rate of this loan is higher than other regular loans, you should strictly borrow what you need.
Although the interest rate is higher, it also varies from lender to lender. You should do proper research before finalizing a lender. If the property is pricey, you could hire a broker, who would do the job of selecting the best lender.
Since the loans are meant to fulfill immediate demand of funds, the paperwork is very straightforward. You will not have to wait for days for document verification. Most lenders give a quick approval and transfer of funds to the borrower’s account is swift.
With bridging loans, you also get the advantage of choosing the repayment method. You can choose to repay before or after you have sold the property.
For repaying before, you will be required to make repayments in small amounts within a limited period.
If you succeed in doing so, your credit rank gets a boost. In case you chose to repay later, you will have to repay in full from the proceeds of your sold property.
