When you are in a situation in which you need to pay large amounts of money as you’re waiting for funds to come in, for instance, a loan to be available – bridging loans come into the picture to help. It’s used when individuals are in extreme need of finances to pay off for things like mortgage, to finalise a property sale or for a certain thing which needs a lot of money.
Essentially, bridging loans are essentially short-term lending solutions. For example, they help in the completion of a property purchase before selling off the existing one.
To find out more about what a bridging loan does, keep reading on to further understand this loan type.
What is a bridging loan?
A bridging loan is an instant cash loan or access to funds that you can use to buy your future home before selling the current one. It is a short-term lending option for property buyers. Licensed moneylenders in Singapore offer this loan because it effectively bridges the funding gap of purchasing your new home and selling the existing one. With a bridging loan, you can buy your new property like other cash buyers.
In most cases, a bridging loan lasts for a period of 12 months. However, some cases allow arrangements of long-term loans depending on each individual’s circumstances.
Financial lending institutions usually charge monthly interest on bridging loans, but there is no monthly repayment. You can pay the interests incurred when repaying your loan at the end of the term. There is a provision of borrowing in excess to cover up the interest they add to the total amount you’ll finally repay.
Meanwhile, the reasons why a bridging loan can help in acquiring your next property before selling existing one include the following:
- When you want to secure the next home quickly
- If you have potential obstacles or uncertainties that you need to stop
- Renovating the new property before moving in
- Maximising sale price of existing property
Repaying the bridging loan
When you borrow a short-term finance loan, you get into an agreement of exactly how you will repay the loan.
On the other hand, when you use bridging finance to purchase a new property before selling the existing one, it is a relatively straightforward process. Generally, you can repay with the proceeds of what you got from your previous property. Alternatively, you can take on a mortgage after paying off the old mortgage.
How can I get a bridging finance?
You can access a bridging finance through a finance broker specialist. The best finance broker should access a selection of lenders. They would do all the challenging tasks and scour out the market to develop the most attractive interest fees and rates.
A bridging loan can be a smart decision when buying a new property before purchasing an existing one. However, bridging loan borrowers should not that, since institutions offer them as short-term solutions, they have higher rates compared to long-term mortgages. Therefore, it is vital that you ensure you get the best bridging loan available that suits your personal needs.
With a bridging loan, it acts as a short-term financial solution to your immediate financial issue – be it for selling your home, buying a new house, or developing a property.