When it comes to borrowing money, there are a lot of options out there. You can get a traditional loan from a bank, you can use a credit card or you can take out a bridging loan.
Bridging loans are becoming increasingly popular, thanks to their flexibility and low interest rates. However, one of the biggest advantages of bridging loans is that there are no excessive fees. This is because bridging loans are typically used for short-term purposes.
What is a bridging loan?
A bridging loan is a short-term loan that can be used to finance the purchase of a new property before the sale of an existing property is complete.
What are the benefits of getting a bridging loan?
There are several benefits to using a bridging loan, including the ability to move quickly when a desirable property becomes available, the flexibility to extend the loan if needed and the option to make interest-only payments.
For a quick rundown, here are five benefits of using bridging loans:
Quick to access.
A bridging loan is a quick and easy way to access the funds you need. It is often used by homeowners who are looking to buy a new property before they have sold their current one. It can provide you with funds if you need to complete a property transaction quickly.
A bridging loan does not require a credit check. You can access the benefits of this loan without having to go through a traditional loan process. This type of loan is convenient to avail because it does not always require a good credit standing.
Most traditional banks and lenders are very specific regarding the intended purposes of your loan application and require stressful proceedings and documentations. By contrast, a bridging loan can be used for absolutely any purpose without a question being asked. Just as long as you can prove that you can pay back the loan as required, the justification for your application is inconsequential.
Whilst waiting for your property to sell, you can use the fund for home improvement, which can give your property leverage to increase its value. Once it’s sold, you can still gain profit from the sale and additional money to save or use for repaying your loan. Bridging loans can also be used to pay off an existing mortgage, providing more financial flexibility for homeowners.
Easy to qualify.
Bridging loans are becoming increasingly popular with homeowners. They are a way to raise money quickly, without having to go through the lengthy and often complicated process of applying for a traditional mortgage or loan.
But what makes bridging loans so easy to qualify for?
Firstly, bridging loans are typically only available to property owners. This means that the lender already has some security against the loan.
Secondly, bridging loans often have shorter terms than traditional mortgages, which means that the borrower is less likely to default on the loan.
Finally, most bridging loans have lower interest rates than traditional mortgages, making them more affordable for borrowers.
Low interest rates.
The interest on bridging loans is typically taxed at a lower rate than other types of borrowing, such as credit cards and unsecured personal loans. This makes them an ideal option if you are looking to finance a major purchase.
Another takeaway is that there are no excessive fees. Because the repayment duration is shorter, lenders won’t add hefty fees that would submerge the borrower further and can’t pay eventually.
In addition, most lenders will allow borrowers to make interest-only repayments during the term of the loan, which can help keep monthly repayments low.
Applicable to any type of property.
The most common question asked when applying for a bridging loan is ‘what type of property can be used as security for a bridging loan?’ The answer is: most property types can be used as security for bridging finance, regardless of current conditions. Most mainstream lenders would only lend against properties that are fairly habitable. But in bridging finance, it isn’t the case. Most lenders know you will use the fund for renovation and repairs to achieve a higher value for your old property.
A bridging loan can be a lifesaver for Australian homeowners who find themselves in a tight spot financially. It is designed to help borrowers bridge the gap between the purchase of a new home and the sale of their old home. In other words, it provides the necessary funds to complete a property transaction when there is a delay in getting finance from a traditional lender.
Whilst bridging loans typically come with higher interest rates than traditional home loans, they can also be a very useful financial tool for borrowers who need to move quickly. They can also be used to finance the purchase of a property at auction.
However, it is important to be aware of the risks involved in taking out a bridging loan, including the possibility that your current property may not sell within the agreed timeframe. For this reason, it is recommended to talk to a financial advisor before considering a bridging loan.