Bridging Loans Explained

Published on: 07 May 2021 Last Updated on: 12 September 2024

Bridging loans have become popular among borrowers for all the right reasons. With everyone talking about bridging loans, including the mainstream media, the chances are that you have already heard of these loans before.

This is especially true if you are trying to move houses. However, several people do not know what a bridging loan is and how it works.

Taking a bridging loan could be the best thing to do if you have found a dream house you want to acquire before someone else buys it, and you are yet to find a buyer for your existing home, which still has a mortgage.

A bridging loan will give you the funds you need to buy the second house as you wait to sell the current one. Even so, there is so much more to bridging loans than you might imagine.

In this guide, we will discuss everything about bridging loans from the basics, pros, and cons. keep reading to discover everything you need to know about bridging loans.

So what exactly is a Bridging Loan?

Simply put, a bridging loan is a short-term loan taken on top of the current home loan. As the name suggests, a bridging loan is usually taken when you need to buy a new house immediately before selling your existing home. When you take this loan, you will be paying interest on two loans.

To put things into perspective, bridging loans are a form of interest-only loans.

The value of your existing property will determine the value of the loan. It is also vital to note that these loans have limited terms and contain special concerns. Depending on the lender, the amount and terms of the loan will vary. You can view this bridging loan calculator first before you apply for the loan to get a glimpse of your financial responsibilities.

The structure of bridging loans differs from one private money lender to another. Some private lending providers will require you to continue serving your loan until you settle in your new property. The private finance providers will the interest of your two loans together during the loan duration.

Once you find a buyer for your second property, the mortgage will be discharged. You will then start paying the principal and interest of your current loan. On the other hand, other private lending providers will ask you to service both loans after taking a new one.

After the sale of your home, the initial mortgage will be discharged, while the bridging loan might be converted into the home of your choice for your new property.

When taking a bridging loan, it would help to think about compounding interest because you will be charged for both loans. Always keep in mind that you will end up paying more than you should if you fail to find a buyer for your house quickly. Bridging loan interests are calculated daily and charged monthly.

Another key element you should have in mind is the duration of the bridging loan. These loans usually last around six months to 12 months, depending on the private finance providers and your preferences. Your loan length will be six months if you buy an existing home and 12 months for a new one.

What are the Pros and Cons of a Bridging Loan?

Now that you are aware of what a bridging loan is and how it functions, it is time to look at the pros and cons. Understanding the benefits of these loans and the challenges you are likely to encounter when you take a bridge loan will help you make the right decisions. Here are the pros and cons of a bridging loan:

The Benefits of a Bridging Loan:

Bridging loans have so much to offer. It is crucial to understand what you should expect with this type of loan to get the best options. Here are the pros of bridging loans:

More Convenience:

Do you want to buy your dream home quickly? A bridging loan will allow you to do just that even if you have not sold your existing house just yet.

Flexible Repayments:

Depending on your bridging loan structure, you will only have to service your existing home loan finance when you take a bridging loan.

Avoid Further Expenses:

You will not have to rent when you take a bridging loan. It will allow you to move even if you do not have a buyer for your house.

Considerations of a Bridging Loan:

Like is the case with any other type of loan, bridging loans also have their fair share of cons. For instance, you will be forced to pay more if you fail to sell your house as soon as possible.

Choosing the Best Bridging Loans for Your Needs:

Bridging loans are categorized as open bridging loans and closed bridging loans. Closed bridging loans have a pre-determined settlement date while open bridging loans do not have an agreed settlement date.

When looking for a bridging loan, it will help to consider the duration, interest rates, and loan structure. It would also help to compare alternative loans before making the final decision.

Above all, it is essential to find the right private lending company. Fortunately, you can use an easy-to-use online platform such as ADS.finance to find the best private finance option near you.

Read Also:

Content Rally

Content Rally wrapped around an online publication where you can publish your own intellectuals. It is a publishing platform designed to make great stories by content creators. This is your era, your place to be online. So come forward share your views, thoughts and ideas via Content Rally.

View all posts

How to Prepare for Your Big Move to Brea, California

Brea, California, a city in Orange County, is six miles north of Anaheim, California, and two miles east of La Habra, California. The well-known Brea Mall and the revitalized downtown have made the city a well-known destination for shopping. Its extensive public art program includes a huge collection of works of art dispersed around the city. When the village of Olinda was founded at the start of the 19th century, many businesspeople came in search of oil. The Union Oil Corporation purchased a sizable parcel of land for oil extraction. By 1898, oil drilling towers surrounded the area. In 1911, the villages of Olinda and Randolph were merged into the town of Brea. Meaning “tar” in Spanish, Brea was home to 752 residents when it was incorporated as a city in February 1917. It was recognized as the eighth official city in Orange County. Home to coffee shops and parks, Brea is considered one of the best places to live in California. Therefore, preparing for a move here can indeed be exciting. Planning for a Move to Brea To start preparing for a big move to Brea, you’ll need to make a checklist and plan the following activities. 1. Get Prequalified for a Loan The first thing you need to do is get prequalified for a loan. Doing so will help you see what you can afford in Brea real estate. This will also make it easier for you to search for homes online. Before you begin any search, get prequalified first so you’ll save time and can find a house that meets your monetary criteria. 2. Select an Area Realtor After you get prequalified for home financing, you’ll need to contact a local Brea realtor. He knows the neighborhoods and can direct you to the best Brea real estate listings. For example, some homes are listed at over $1,000,0000 and offer 4 bedrooms and 3 baths, while others feature 3 bedrooms and two bathrooms for around $270,000. Therefore, a realtor can direct you to the property that best fits your current and future housing needs. They will do all the legwork for you while you find the houses that attract your attention online. 3. Search Real Estate Online and Drive by the Chosen Properties Narrow down your choices to about three houses. You don’t want to overdo it. Pick those houses that meet your financing requirements close to where you work or near parks and shopping. After this, drive by the home and check out the surrounding area. 4. Scheduled a Tour with a Realtor Next, schedule a time to see the property with your realtor. Be prepared to ask questions. If you’re interested in a specific home, have your realtor take care of the offer and negotiation process. Begin Your Search for a Brea Home Today You’ve got a lot to think about and to plan if you’re going to move to a great city like Brea. That’s why it’s essential to be confident about your house-hunting and buying objectives. By creating a checklist, you can move quickly forward toward your goal of finding your dream house in Brea. Additionals: Great Tips for Picking the Right Moving CompanyHow To Select The Right Packing Paper For Your Moving NeedsTop 10 Household Items That Are Commonly Damaged During Moving

10 Best Ways To Find Cheap Homes To Flip

Flipping homes for profit is a popular way to make money in the real estate market. It involves buying a property, renovating it, and then selling it at a higher price. But the key to making money in this business is finding cheap homes that you can flip for profit. Here are 10 of the best ways to find cheap homes that you can flip for profit: Top 10 Ways To Find Cheap Homes To Flip 1. Search Online Listings Online listings are one of the most convenient ways to find cheap homes that you can flip. You can search by location, price range, and other criteria to narrow down your search and find properties that fit your budget and investment goals. Additionally, many online listing sites offer additional information about each property, such as estimated renovation costs and potential resale values. 2. Attend Foreclosure Auctions Foreclosure auctions are another great way to find cheap homes that you can flip. At these auctions, banks or other lenders will sell off properties they have repossessed from borrowers who have defaulted on their loans. The properties are usually sold at significantly discounted prices, which makes them attractive investments for flippers looking to make a quick buck. However, it’s important to note that these auctions tend to be highly competitive, so you need to do your research beforehand if you want any chance of success. 3. Network with Real Estate Agents Real estate agents often have access to exclusive listings of properties before they hit the open market, which makes them an invaluable resource when searching for cheap homes that you can flip for profit. Reach out to local agents in your area and let them know what type of property you’re looking for, so they can keep an eye out for potential deals on your behalf. 4. Look Into Pre-Foreclosures Pre-foreclosures are another great option when searching for cheap homes that you can flip for profit, as they tend to be priced below market value due to their distressed nature. To locate pre-foreclosures in your area, contact local banks or check public records such as court filings or county tax records, which may list individuals who are facing foreclosure proceedings on their properties. 5. Utilize Property Wholesalers Property wholesalers specialize in locating distressed properties. They negotiate deals with sellers before flipping them off at a markup price. This makes them ideal partners when searching for cheap homes that you can flip for profit quickly and easily. You don't have to go through all the legwork yourself. Be sure to thoroughly vet any wholesaler before doing business with them, as there are plenty of scammers out there looking to take advantage of unsuspecting buyers! 6. Drive Around Neighborhoods Sometimes the best deals aren’t always listed online or even advertised publicly, so driving around neighborhoods is still one of the best ways to uncover hidden gems when searching for cheap homes. Keep an eye out for signs advertising “fixer uppers” or “handyman specials.” These types of properties tend to be priced lower than comparable houses due to their condition. This allows savvy investors like yourself to make some serious profits after renovations! 7. Join Real Estate Investment Groups Real estate investment groups provide members with access to exclusive deals on properties throughout their city or region, which makes them great resources when searching for cheap homes that you can flip quickly and easily. Many groups also host regular meetings where members discuss strategies and share tips about maximizing profits from flips—making them invaluable resources, regardless if this is your first time flipping houses! 8. Research Tax Sales & Government Auctions Tax sales occur when municipalities auction off delinquent tax liens on residential real estate. At the same time, government auctions happen whenever federal agencies liquidate seized assets such as foreclosed houses. Both options offer investors unique opportunities to purchase discounted real estate; however, it’s important to note that there tends to be quite a bit of competition at these events. So, it pays to do some research beforehand if you want any chance of success! 9. Look Into Probate Properties Probate refers to a process wherein a deceased person's assets are distributed according to his/her will. However, sometimes certain pieces of real estate may be left behind unclaimed—which presents an excellent opportunity for flippers looking to score bargain prices! To locate probate properties in an area, contact local courts and inquire about any upcoming sales. 10. Check Out Bank Repositions & Short Sales Banks typically repossess (or repo) houses from homeowners who fail to pay mortgage payments, while short sales involve selling a house below its market value in order to avoid foreclosure proceedings. Both options offer investors the chance to acquire discounted real estate. However, short sales tend to be more complicated since you must negotiate directly with the lender, whereas bank repositions require less paperwork since they are already owned by the institution itself! Additional: 4 Tips For Finding The Perfect Home 6 Expert Tips for Finding The Right Home to Buy 10 Work-From-Home Jobs For Moms And Dads Mirrors For Sale – Finding a Perfect Home Decorative Item

Benefits of Investing in City Centre Property

Property investment is one of the best ways to make money out of your savings, and investing in UK city centre property. Above all, it has been proving an incredibly smart investment strategy. Researchers always said that location is the most important part of a property investment and city centre postcodes in some of the UK's booming regional cities. These are becoming highly sought after by investors from around the world. Why People are Investing in City Centre Property? Over recent years, there has been a noticeable and obvious shift in the number of people choosing to live in the city centre. There are many reasons for this, including increased opportunities, a desire for a cosmopolitan lifestyle and so on. Aside from that one of the significant rises of investing in city Centre properties are in the number of people moving to the city for university and staying there. For buy to let property investors, it is wise to choose a property in a location where there is high tenant demand. After all, this ensures high rental returns and fewer void periods. According to figures from the Office for National Statistics, Liverpool had the fastest growing city centre population in the UK. It happens with a population increase of 181% between 2002 and 2015. Other cities have also registered record population growth; Leeds’ population grew by 150%, Manchester by 149% and Birmingham by 163%. Such huge population growth has led to an incredibly high demand for rental property, with new apartment buildings becoming the most sought-after option. As cities grow up as well as out, investing in city centre property has never been so lucrative. The Benefits of Investing in City Centre Properties Investing in city centre property is also advantageous due to the premium tenants who are looking for these city centre rental properties. Every landlord has an ideal tenant in mind, and if you are looking for highly educated, high earning and stable tenants, then city centre property is perfect for you. More than a third of city centre residents have a degree, with many moving to the city for education. Over half of the people living in big cities work in highly skilled professional occupations like financial and legal services and the digital sector. Many of them are also happy to get the renting for a longer period of time as part of the so-called generation rent. This is all about preparing to pay a premium for better quality accommodation with extra options. These are like high-speed internet, communal gardens and cleaning services. Additional Benefits of Investing in City Centre Properties Major urban regeneration programmes have been witnessed across many of the UK's big cities. This is totally transforming them from tired post-industrial sprawls to thriving modern hubs. This has made city centre living far more appealing, with better access to jobs, leisure activities and lifestyle choices. Projects such as Liverpool One, Manchester’s MediaCityUK and the Albert Dock show just how much of a difference regeneration efforts can make. Furthermore it can increase house prices and rental demand. Property investment firms like RW Invest have seen a huge surge in the number of investors. These are from both at home and abroad who are looking for rental properties in these newly reinvigorated areas. Most UK property has continued to increase in value for a number of years. But when it comes to city centre property, these rises are even more apparent. As well as this, these major projects are often backed by both government and private funding. At these levels which just aren’t seen outside of the city centre. For investors who are looking for a property that has huge potential capital appreciation. In this case, it is obvious why city centre property investment is so lucrative. Read Also: How To Protect Your Property As A First Time Landlord? Benefits Of Working With A Realtor When Selling A Property

Bridging Loans Explained

So what exactly is a Bridging Loan?

What are the Pros and Cons of a Bridging Loan?