A bridging loan is a short-term loan typically used to finance the purchase of a property before you can arrange longer-term financing.
Bridging loans are usually for 12 months or less. This can be an attractive option for borrowers who are unable to obtain traditional financing, or who need to close on a property quickly.
Curious about this type of loan? Here are six other reasons to consider using a bridging loan:
1. You Need to Buy a Property Before Your Current One Sells
A bridging loan can help when you need to buy a property before your current one sells. You can use this type of loan as a short-term solution, providing the funds you need to purchase your new home before your old one is sold.
Bridging loans typically have high-interest rates, so it is important to compare different options and find the best deal for your situation. Once you have sold your old property, you can use the proceeds to pay off the loan and avoid accruing any additional interest charges.
2. You Want to Take Advantage of a Good Investment Opportunity Quickly
You can take a bridging loan if you want to take advantage of a good investment opportunity quickly. If you have found a property that you want to purchase as an investment, but you do not have the funds immediately available, a bridging loan can provide the money you need. This type of loan can be a good option if you are confident that you will be able to sell the property quickly and make a profit.
3. You Need to Consolidate Debt or Pay Off Taxes Owed
A bridging loan can help when you need to consolidate debt or pay off taxes owed. If you have multiple debts that you are struggling to repay, a bridging loan can help you consolidate these debts into one monthly payment. This can make it easier to manage your finances and may help you to get out of debt more quickly.
Bridging loans can also be used to pay off taxes owed, which can free up funds that can be used for other purposes.
4. You Are Renovating a Property and You Need Extra Funds
If you are planning to carry out major renovations on a property, a bridging loan can provide the money you need to finance the project. This type of loan can be a good option if you are confident that the value of the property will increase after the renovations are complete.
5. You Are Relocating For Work and Need o Buy A New Home Before Selling Your Current One
A bridging loan can also help when you are relocating for work and need to buy a new home before selling your current one. If you are moving to a new city for work, you may need to purchase a new home before you can sell your old one. A bridging loan can provide the funds you need to make the purchase, allowing you to complete the sale of your old home and avoid having two mortgages.
6. You Are Inheriting a Property and You Need to Sell It Quickly
A bridging loan can help when you are inheriting a property and need to sell it quickly. If you are inheriting a property that you do not want to keep, a bridging loan can provide the funds you need to sell it quickly. This can be a good option if you want to make a profit from your inheritance and you are confident that you will be able to sell the property fast.
How to Apply for a Bridging Loan
To apply for a bridging loan, you will need to provide some basic information about yourself and the property you are looking to purchase. You will also need to have a good credit history and be able to prove that you can repay the loan. However, requirements differ from one lender to another.
It is also important to compare different lenders to find the best deal for your situation. Bridging loans typically have high-interest rates, so it is important to shop around and find the best rate possible.
When comparing bridging loans, you need to look at the total cost of the loan, not just the interest rate. Some lenders will charge additional fees, so it is crucial to check the small print before you apply. It is also a good idea to speak to a mortgage broker who can help you compare different deals and find the best one for your needs. Once you have found the best deal, fill out an application form and provide the information needed. Once you are approved for the loan, the lender will provide you with the funds you need to buy the property.
If you find yourself in any of the above situations, a bridging loan could be a good option for you. However, bridging loans typically have higher interest rates than traditional loans, so it is important to compare offers from multiple lenders before deciding on one.