Bridging loans are short-term financial loans that individuals can use to create a deposit on a new house before they sell their existing residence.
It is used to help an individual secure a new property as they wait for their current home to sell. They can purchase and move into a new home in super quick time rather than waiting around for months as their existing home sells. These loans are getting popularity inside the market merely because they are fast to get.
There’s no lengthy process and due diligence period as opposed to standard mortgage loans, which assists in securing a new home without having delays.
It could be utilized just before obtaining a regular mortgage loan on the new house. The current home is typically put up as security to acquire the bridging loan.
It can get to be an issue when a new home needs to be purchased fast. Your current home is on sale; thus, a bridging loan is a way of providing essential money to get the new property.
The Application Process to Obtain a Bridging Loan?
The bridging loan application method is simple, and it may be a rapid process. It would help if you had a bridging loan broker to help you with the process. They can help with applying it correctly and understanding all the documentation you will need.
The loan company will supply an application process form which requires completion with all the necessary documentation and submitted by you.
This loan has different types of costs, such as valuation, broker fees, arrangement fees, exit fees, telegraphic fees, and legal fees. Information about this will be offered from the loan provider so that the payment and bridging loan are processed.
Your specifics need to be offered inside the application together to avail this loan. The loan company might ask particulars about the new home that you wish to purchase with the finances.
You have to comply with the bridging loan terms and conditions. Also, any fees that are associated with obtaining the loan. Since you will be using the current house as security, you will need to supply home details for the loan provider. You’ll also have to give your solicitor’s professional information to start the process.
Right after the loan is processed, the money will remain for your account. The cash could be used to manoeuvre ahead with the purchase of the new home.
Using a Bridging Loan Calculator
It is a good idea to understand how much the loan will cost you over the borrowing period. One way to do this effectively is to use a bridging loan calculator.
There are many websites from bridging loan lenders and brokers who have a bridging loan calculator to use. I would recommend searching the term “bridging loan calculator” on google to help find a calculator to use.
The calculator will allow you to input all the fees and interest rate within it and show results on the actual cost of the loan and your repayment process.
Paying Back the Bridging Loan
You have to pay the agreed interest with the loan terms. In the event the current residence is sold, the funds from the sale are then utilized to repay the loan debt, paying earlier will benefit you from saving on the interest. Keep in mind that there may be a charge to repay earlier than anticipated.
Important Factors to Note
Bridging loans carry a higher interest rate than your regular mortgage. They can go as high as 2% per calendar month in some cases.
They have different kinds of fees associated with them in the costs. There are various ways of paying interest on a bridging loan, such as monthly or rolled up until the end of the loan term.
The lender will have a charge on the current property and failure to repay on time may result in your home getting repossessed.