Bridging loans are becoming more and more popular, so you may have heard of them. When a home buyer is buying a different home before they sell their current home, a bridging loan is one way they can find a down payment for it. Home equity loans are another option, are less expensive, and contain more benefits. However, a bridging loan can be a quick solution if you need to buy a house before selling your current one. Many lenders won’t give you a home equity loan of your home is on the market. To determine what is right for you, you’ll need to weigh up the pros and cons and decide what is right for your situation. In this post, we explain bridge loans in detail so you can decide what the right route is for you:
Depending on the lender you go for, the rates will vary. Interest rates always vary, but you could pay up to 18% annually on a bridging loan. You’ll also need to pay an admin fee, appraisal fee, escrow fee, title policy, notary fee, recording fee, and drawing fee.
There are benefits to getting a bridging loan. You can put your home on the market without restrictions, for one thing. For another, you may not have to pay any money back for a couple of months. You may also be able to move forward with the purchase of a house, without having sold your current one. Bridging loans can be arranged quickly if you fit into the categories required to get one. In many cases, the loans are flexible and you won’t be charged for wanting to pay it off as soon as you can.
Of course, there are downsides to getting a bridging loan too. You will pay more for a bridge loan than you would for an equity loan. You may also not meet the requirements in order to secure one of these loans. Many people report stress from paying 2 mortgages and interest in the loan – which is why you need to consider this decision very carefully.
You need to consider your bridging loan lender very carefully before entering into anything. A great company will find out how you plan to pay the money back for your loan if your plan doesn’t work the way you’d hoped. You need to consider the worst possibility, so that you can think of an effective exit strategy. An FSA regulated company is always your best bet too, so that you know for sure that they’re legit. You can use a bridge loan calculator to work out how much you should be able to lend, if you’ve decided that this is the right decision for you.
A bridge loan should only be considered as a short term option, as many people can get into debt if their plan falls through. Good luck and thanks for reading!