ALL YOUR QUESTIONS ABOUT SHORT TERM BRIDGE LOANS ANSWERED
Many people usually turn to adjustable and fixed-rate mortgages when they want to purchase a home. There is no denying that these options are viable in most cases. However, flexible and fixed-rate mortgages might not work if you want to purchase a new home before selling your existing one. If you are looking to fund the purchase of your property before your current one sells, it might help to turn to bridge loans.
Before you get started with bridge loans, it will help to understand how these loans work and why they are essential. Here is your beginner’s guide to short-term bridge loans.
FIRST THINGS FIRST, WHAT EXACTLY IS A SHORT TERM BRIDGE LOAN
Simply put, a bridge loan or bridge financing is a form of short-term loan issued to individuals or companies before they complete an existing obligation. Taking this loan gives borrowers immediate funds to complete an existing financial obligation. In most cases, short-term loans last less than one year and have high interest rates. Moreover, these loans are backed by collateral, including inventory or real estate.
UNDERSTANDING THE BASICS OF A BRIDGE LOAN
Popularly known as a bridging loan or interim financing, bridge loans are ideal for borrowers who want to cover an existing financial gap. Both individuals and corporations can qualify for bridge financing. Lenders usually customize interim financing to suit different situations and the borrower’s needs.
Case in point, you can use this loan to finance the purchase of your new home before your existing home sells. This will give you more time and the peace of mind you need as you wait to complete the sale of your current home. However, bridge loans have higher interest rates than other loans such as mortgage and home equity line of credit. Besides, borrowers are still required to serve the existing mortgages until the current home is sold.
WHY TAKE A BRIDGE LOAN
Taking a bridge loan might be the only viable option for you if you want to secure opportunities without completing your existing financial obligations. Moreover, applying for bridge loans is easier than traditional loans. Borrowers get approved easily and have the freedom to secure opportunities quickly. This will also save you time and money.
Finally, bridge loans have convenient and flexible payment terms than other loans. Borrowers have the freedom to start servicing their loan before or after they secure an opportunity.
A short-term bridge loan is the best solution for you if you do not want to miss out on an opportunity. However, make sure to understand the terms of your loan before you get started.
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