Bridging finance can be a great way to bridge the financial gap’ that exists between purchasing an entirely new house and selling the one you have. It’s important to understand the advantages and disadvantages of a bridging loans to determine if it’s the best option for you or not.
One of the major benefits of Bridging loans is the ability to buy a home you want without having to wait for that sale on your existing one. For instance, it could be that you love the house so much you’d like to buy immediately. But, you might have a difficult time making an investment down payment for the new property until your current home is sold. Another option is to apply for a bridge home loan to fund the purchase and give you an additional time to sell your current property, which can aid in getting a better value by giving you opportunity to negotiate better conditions.
In bridging the gap between owning and selling your current and new home or bridging the gap between them, it can also save you money on temporary cost of storage or rent because your new residence is likely to be ready for you to move in when your previous home is gone.
Although a bridging loan may be a great option to fund your home purchase if you’re still not able to sell your current home However, there are some dangers to know about:
The rate of interest charged for short term bridging loans will typically be greater than the typical house loan. Thus the time the time it will take to get rid of your home and the longer it takes to sell, the higher interest you’ll be charged. If you decide to capitalize your interest you’ll end up paying interest on the interest, which can raise your expenses substantially.
If you’re taking out the bridging loan in order to purchase an asset before the current home is sold you run the possibility of spreading your resources too thin if your house sells less than you anticipated. This can result in an increased amount of debt and higher monthly payments, which could cause financial strain.
Also, it could be that your mortgage provider doesn’t provide an Bridging loan. If this is the case it could be necessary to refinance the loan you have and increase the cost. For instance, you may be required to pay the exit fee to the lender you currently have (if there is a home mortgage with a fixed interest rate) and valuation charges for both properties.
It’s important to note that not all people qualify for an Bridging loan. A majority of lenders require you to possess substantial equity in your home to qualify for bridging financing. A broker’s advice can aid you in understanding the advantages and disadvantages of obtaining an bridging loan, and help you decide on a shrewd decision if it is in line with your needs or not.