What is Bridging Finance?

Bridging finance is a process which makes the process of getting a home loan simpler and hassle free. Bridging finance gives people the opportunity to buy a new home even before they have sold out their old house or property. As we all know, arranging for sufficient funds to buy a new house can be an expensive affair, and if you haven’t still sold your previous house, the situation gets even tougher. Bridging finance can also be understood as a temporary loan for buying a house without having to wait for the previous house to be sold. This saves a lot of time and also a lot of issues. It also gives you the advantage of not staying in a rented house.

Understanding bridging finance

Bridging finance aids in the speedy completion of the process of buying a new house by procuring a temporary home loan. The funds received from the bridging finance can help you in various purposes like development of a new construction, auction finance, renovation of your house, first as well as second mortgages, and many more. The tenure of the loan, as is in case of all loans, is at the discretion of the financial institution or the money lender. Some of these institutions and lenders often allow the borrowers to pay the charges only after the completion of the entire process. This can be very beneficial if you are looking down to cut some costs, thus helping you to save money.

Is bridging finance always helpful?

Not everything about bridging finance is useful. There are also a few disadvantages that are combined with it. The first condition is that the buyer must necessarily have an excellent equity on the current property or estate and it should be enough to support the purchases of both the houses. The second condition is that the selling process of the existing property must be done as soon as possible. If the process is delayed, the interest is calculated and added up to the principle amount. Now, this could build a pressure on the borrowers and it might result in selling of the house at the much lower price than the actual sale value. However, most of the banks keep the bridging period between six to twelve months. Hence, if you are very sure that the entire process of selling the existing property and buying the new property will not take more than a year, bridging finance could be the best deal for you.

Bridging finance –way to your new home

Bridging finance is seen as the banks and moneylenders as a risky investment. Due to this, these institutions are forced to charge extra amount of money in the form of interest rates. For these types of loans to be approved, a lot of paperwork has to be done. As opposed to traditional mortgage loans which used to bring in a lot of profit to the lenders and banks, the bridging finance is not known to be that profitable. Due to this reason, there are not many institutions that offer this facility.

Sorry, comments are closed for this post.