If you’re thinking about buying a property for investment purposes or as a new residence but find yourself coming up short in the financial department, there are numerous options out there. One of these is a short-term loan that can be arranged within two or three days, known as bridging finance. This can help you make ends meet before securing a more long-term loan. In most cases, this will be secured by the buyer’s real estate agent.
Securing bridging finance is only one of the ways that a real estate agent assists their clients. You can start the process of finding the right real estate agent to work with by registering your details at LocalAgentFinder. This service has been helping connect buyers and sellers with real estate professionals since 2007, and can help you compare and select the right individual to help you with financing and other matters. When looking at financing options, you may see risky loans that come saddled with a higher interest rate. Bridging finance is usually preferable because it is more low-risk. It can be a secure way to take out money on a short-term basis.
Types of Bridging Finance Loans
To get started with determining whether or not bridging finance will be right for you, it’s helpful to learn more about the different types of options. There are generally two styles of bridging finance to choose from. When you are comparing these, you’ll need to take the specific terms and conditions of each type of loan into account. Both of these are used by investors to cover or bridge the specific amount of money they need while waiting for an expected sum of funds.
One of the prime examples of a good time to obtain bridging finance is when you are in the process of selling your home. You may have already negotiated a deal with a buyer and secured the sale, but then you still have to wait for the funds to come through from the sale. These are usually not available for about 90 days, during which time you have to wait. If you’re looking for a new home and see the perfect property, you’ll need this money to put down a deposit and secure it.
This makes it difficult to purchase your next home, even if you have seen a great opportunity. You may not want to wait on this opportunity and allow it to pass you by, in which case you have a dilemma. This could be the perfect time for you to buy property, after all. The simple solution is to apply for a bridging finance loan, in order to cover this 90-day gap until you receive the funds from your property sale. This creates a “bridge” from one property to the next, made possible with the short-term loan.
There is very little risk for the lender with this type of loan, because it is reasonable to expect that the funds to repay it will be arriving in a pre-specified period of time. This allows the lender to offer a low interest rate for this type of bridging finance. The homebuyer benefits with the means to buy the property that they have been eyeing, within a short enough time period to secure it. Many properties require a secure settlement within 30 days, which is why access to quick cash is sometimes needed. Your real estate agent can help you decide if bridge financing will be applicable in your particular situation. Compare agents using the no-obligation service at LocalAgentFinder to find the professional assistance you need.
Open vs. Closed Bridge Financing
The two main types of bridge financing are known as open or closed. Closed bridge financing refers to when the dates of the loan are set right at the beginning of the loan. This keeps risk to the absolute minimum, because the lender knows exactly when they will be paid back. This is the type of loan referred to in the example given above.
There is a second type of financing known as open bridge financing, however. This is applicable when a seller has their home on the market, but they have not yet finalised any sales. They may still want to start looking for a new home to buy, but don’t know exactly when they’ll have the means to do so. If you decide to apply for bridging finance in this type of situation, there is a bit more risk involved in the eyes of the lender. There is always the chance that your property will not sell, or that it will sell for less than you anticipated. As a result, interest rates will be higher. The date when you’ll have the money to repay your loan is not specified, but you will be given a general window of time to repay it.
In most cases, it’s best to have your real estate agent work with you to secure these types of financing. You can find a professional agent to represent your needs by registering now at LocalAgentFinder. This allows you to receive agent proposals so that you can compare and select the most qualified individual to work with on your financing and other housing needs.
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