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How to Benefit From Bridging Loans
Bridging loans can be the ideal solution for individuals or companies if they need short term funding for investments, usually real estate assets. As the name obviously shows such loans are a temporary solution until you manage to obtain money from another source or to get a long-term loan. For example, if you just determined your dream house, you absolutely want to obtain it but it will require a while until you often sell your current property, you can use such type of loan. You will be in a position to purchase the new property and you may have enough time to market your current home for your right price. However, you need to remember that such loans shouldn't be a first choice for individuals as well as businesses. They come with relatively high interest rates and unless you are certain you happen to be able to repay all of them after a short timeframe, you may be much better with other finance alternatives.
Advantages and disadvantages of bridging finance:
The biggest positive of such type of loan is that it lets you take advantage of owning a home opportunities. Bridging lenders can normally approve loans quickly especially if you have a low Loan-to-Value. If you are certain that it is possible to repay it fast then its a good solution. However, it's important to choose to deal with no early repayment charges in order to clear the loan immediately when you have access to better finance.
Bridging loan also bring disadvantages. Access to such immediate finance comes in the cost: interest rates are using a few points higher in that case for long-term loans, there are also design, valuation, legal and possibly broker fees to be paid on top so ensure you know all the costs before signing set for such a loan. Before getting such that loan it's wise to utilize a broker and shop around for top level terms.
Types of bridging financial:
There are two main types of Bridging loans: closed bridge and exposed bridge. If you already exchanged around the sale of your aged property, the chances for your sale to fall through have become low. Thus, the lenders will agree a closed bridge financing in your case. If you're in that situation, it's important to discuss two aspects with all the lender: first of all, find out if the lender can offer you a no early repayment package. Secondly, ask about mortgage options. It's easier for to refinance your closed bridge loan with a long-term mortgage through similar lender - less bureaucracy.
If you didn't put your existing property on the market or you simply weren't capable of sell it yet, but you want to go ahead and purchase a new property, then the lender will offer you an open bridge loan. Get one only should you be sure you will be able to sell the old property in a few months and repay the high mortgage rates loan otherwise it will quickly become very costly.
