Are you thinking of selling your house as you're planning your next step on the property ladder? Selling a home and buying a new one at the same time is a tricky balance that could cause financial stress - particularly in the case that you, like most homeowners, plan on using the profits from selling your property to purchase your next one. A bridge loan can make the process easier for you to buy a home especially in instances of property chain breaks.
Sarah from Finbri bridging loans says “We see a lot of interest every year in property bridge loans due to chain breaks, where a buyer for a property pulls out and jeopardises the ability for the next person in the chain to purchase their next property. It can cause a domino effect, however one bridge loan could potentially save the entire chain from collapsing.”
What is bridge lending?
A secured bridge loan can be described as a loan to fill the gap between purchasing a property and the sale of your existing property. Sometimes you'll want to buy prior to selling, which means you won't be able to use the proceeds from the sale for the purchase of your new home. This could be a problem when you are relying on that cash to purchase the new house. While you wait you can seek the bridge loan to fund a home purchase.
How does a bridge lending function?
A bridge loan can help to finance your home purchase, even if you do not have the funds easily available. The most popular method to utilise the bridge loan is to pay for closing expenses. It is possible to apply for a secured bridge loan through the help of a broker. Though the terms might differ from lender to lender, its generally acceptable to take out up to 80 percent of the value of your existing home.
How to obtain a bridge loan to purchase a home
To be eligible for a bridge loan, your lender will examine standard evidence such as your available equity in the property you wish to use as security, they’ll also want to see a statement of income and debt liabilities, and view your credit history. It is helpful if you've had a good credit score but its not essential. If you don't have sufficient equity in the home you're currently living in It could be difficult to be eligible.
How can you pay back the bridge loan
The loan is typically for one to two years, after which the term will end. It's essential that you’re certain of a sale of your existing property within this timeframe to avoid additional fees. It is crucial to understand the repayment conditions with your lender and be sure you're fully aware of the steps to follow.
Benefits of bridge loans
- It is beneficial in a buyer's market. When the market’s booming and you're competing against many other buyers, cash buyers of property are desirable. With the aid of a bridge loan you can turn into a cash buyer. A bridge loan is a way to remove any financial constraints that you have included in the offer. This is attractive to sellers because it gives them certainty that the deal will complete unhindered.
- Quick financing. It is easier to get an emergency loan. This means you don't have to fret about selling your home prior to purchasing your next home.
The bottom line? Be sure to evaluate your options and give yourself enough time to think about different methods of financing. If you think a bridging loan could be right for you then seek the assistance of a broker who has a good reputation near you and arrange a call. There should be no obligation for initial discussions and you should be able to receive a loan proposal if you’re eligible without any commitment or payment.