Saturday, January 12, 2013

A Brief Guide To Bridging Loans

Bridging loans are short-term and temporary loans. This type of loan is commonly used when a borrower is aiming to complete the purchase of a new home while their old one has not been sold yet. They can use the proceeds as a down payment for the new home. Bridging loans are becoming more popular today due to the benefits they give to home buyers. They are also referred to as swing loans.

The biggest benefit that borrowers get from opting for a bridging loan is that they can rely on fast processing and approval. Unlike traditional banks, bridge loan lenders can provide funding in a couple of days. However, they utilize almost the same process as banks before they approve applications. Generally, lenders obtain an independent property valuation first and then conduct background checks. Mortgages that are tied up with bridge loans usually end within a 12-month period.

There are many reasons why borrowers opt for bridge loans. They often need them to finance a property purchased at places like auctions. They may also need the funds to refurbish a property, raise short-term capital and take advantage of an opportunity that needs fast settlement.

Selling a home does not happen overnight. It is common for properties for sale to be on the market for months. With this, owners who rely on sale proceeds are unable to move to their new homes due to a lack of funding. Bridging loans are the perfect solution.

Bridging loans are applicable for almost all sorts of borrowers. It can be an individual who has excellent credit history or a bad one, limited companies, self-employed people and businesses. They may use assets like semi-commercial, commercial and residential properties as security for the loan. These properties can either be partially or fully developed, need renovation, be in good condition or have standard or non-standard construction.