What is bridging finance?

If you’ve found the home you want to purchase, but haven’t sold your previous home, then bridging finance may be right for you. Bridging finance is usually a short-term loan, normally (but not always) at a higher interest rate, obtained by individuals in the purchase of a home, while waiting for the proceeds from the sale of their previous home. Essentially it is used to cover the gap of time between when they receive the funds from the sale of their current home and the payment of monies in the purchase of new home. Bridging finance can also be used when their savings or normal mortgage falls under the price being asked for the property. Bridging finance does have many other uses, such as for property renovations, auction or below market purchases, assistance with cash flow issues, help with tax liability issues, and business acquisitions.

The manner in which bridging finance works is very simple. There are many scenarios in which a bridging finance loan can be ideal for you: an example is if you’re looking to buy a new property and are waiting to receive the funds from the sale of your previous property. The bridging finance loan can increase the amount of your current home loan to cover any money needed for the purchase of your new home or it can provide a short term home loan for your new home while your previous home is sold and payment is received from buyers.

Some of the features that bridging finance loans have are: flexibility in repayment of the loan, interest only repayments throughout the bridging finance period, loans of up to ten years available, and minimal loan approval fees. The main benefit of bridging finance is your ability to purchase a new property, even if you haven’t sold your old property yet. It can be used to remain in your old property while the construction is completed on your new property. Bridging finance loans can alleviate the pressure of having to sell your home quickly, by offering six month to one-year loans. The interest on bridging finance loans can be the same as normal housing loans and some come with interest only payment plans. The usual term for a bridging finance loan is just a little over six months, but under a year.

One of the main reasons bridging finance is so popular is that these types of loans are relatively easy to obtain. Lenders do not take a long time to make loan decisions as they are aware of the importance of obtaining needed financing quickly. In most situations, you can contact a short term lender via phone and make arrangements or complete a simple questionnaire on-line to start the process for a bridging finance loan.

Due to the large number of institutions and bank offering bridging finance loans, you should shop around when looking for any type of loan. It is also imperative that you understand the terms and conditions before signing off on any type of loan.