Essentials on Bridging Loans
You might be torn between paying your debt or making the investment of your life. Luckily, bridging loans have come up to give investors the funding they need. With such an option, you do not get to miss out on the investment of your dreams. Bridging lenders have increased over the years. This means that there are many options to choose from. Besides, your benefits will solely rely on the information you know about bridging loans. Here is vital information on bridging loans.
First, it would be beneficial to know what bridging loans are. The loans are referred to as bridging loans as they are used to bridge the gap between your cash flow needs and purchasing a new property. They are short term loans in nature. Commonly, they are form 6 months to 12 months. They will finance you until you have long term finance on the new property or found another way out. Also, they give the borrower the chance to find the necessary funds before selling their home.
It is vital to know people who can use the bridging loans. If you are an investor or a landlord, then this loan is ideal for you. The loan would be helpful in property renovations, investment purchases, and home purchases. If you want to make an investment before selling your now property; the loans are suitable for you. They are also ideal if you have purchased a property, done some renovations and need to make an immediate and fast sale.
Since they are no different from other loans; you will need to know their interest rates. When it comes to bridging loans, you can either choose a variable or fixed interest rates. By going for a fixed price you have the assurance that the monthly payments will remain standard. When it comes to the variable rates, the interest is deemed to fluctuate monthly. In most cases, the interest rates of bridging loans will fall between 0.40% to 1.5%.
Bridging lenders offer borrowers open and closed loans. If you want flexibility, open loans will be the best for you. With such an option, there is no definite time in which you have to clear the debt. If you are sure of when you will have the cash to payback, you can go for the closed loans.
Given that you are well-informed on the basics of bridging loan, it would help to know their advantages and disadvantages. Compared to other loans in the today’s market, bridging loans are quite reasonable. They are flexible and allow you to make repayments when you can. A significant con is that they are more expensive than your average mortgage.