In a perfect world, buying a home would be a fairly easy process. You’d only need to find the ideal property, sell your old one, and move into your new house. However, in reality, the process can get complicated. You may find your dream home before getting a buyer for your old one. What do you do in such a case? How will you finance the new home if you haven’t yet sold the old one?
Bridging finance offers the perfect solution for home buyers. With a bridging loan, you can buy a new home before getting a buyer for your old property.
What is Bridging Finance?
Bridging finance, also known as bridging loan, is a loan that provides short-term cash for a real estate transaction until one secures a permanent financing option. The loan bridges the finance gap that is created when an individual wishes to buy property but hasn’t secured financing for it yet, mostly due to delays in finalising a real estate sale.
Bridge finance is particularly useful for individuals who are selling a home to obtain financing for a new property. If you don’t get an immediate buyer for the old home or the transaction delays, the loan will enable you to finance the new house as you wait to finalise the sale transaction. Bridging home loans are offered between one and eighteen months, and they are repayable at the end of the loan period. Therefore, one has ample time to finance the new house, sell the old one, and commence payments on the loan.
Do I Need Bridge Financing?
Who needs bridge financing? Is it something you should consider before commencing a real estate transaction?
Anyone who’s intending to finance a new home with money from the sale of an old one should consider bridge financing. Real estate transaction can be complicated. You may locate your dream house before finding a buyer for the old one. If this happens, you risk losing the new home, especially if it is on high demand and you are unable to find alternative financing.
In some instances, you may find a ready buyer, but the transaction gets delayed. Issues such as property inspections can prolong the transaction period, especially if the checks unearth serious problems. Also, in some cases, the buyer may experience hitches in financing, and this will further delay the sale.
A bridging home loan hedges you against any circumstances that may delay cash from the sale. It gives you peace of mind so that you can acquire your dream house as you find the right buyer for your old one. What’s more, you can also use the money to fund conversion work on the new property.
What are the Benefits of Bridge Financing?
Bridging financing offers various benefits over other forms of financing. First, the loan is processed in less than 14 days. With other financiers, you may be forced to wait months for approval. Therefore, if you need quick funds for a real estate transaction, a bridging loan is your best option.
Secondly, the bridging market is very competitive; therefore, loan interest rates are friendly. You can get lower rates than what most financiers would offer. Additionally, there are no monthly payments — the loan is repayable in full at the end of the term. Therefore, you get ample time to settle down in the new home, sell the old property, and consolidate finances for loan repayment.
Final Thoughts
Real estate transactions may not always be as straightforward as you expect. The last thing you need is to get stuck while trying to buy a new property due to the lack of finances. Bridging finance can come to your aid in such an instance. Within a few days, you can apply and get approved for a bridging loan, and pay for your new property. Consult the experts for more information on how to apply for a bridging loan.
