Bridging Finance
Bridging Finance Offers a Solution for Homeowners
If you're a homeowner who is about to buy-up but has yet to sell your present home, then you may find a solution through a Bridging finance company. Bridging finance gives the homeowner a span of time, or a bridge, whereby they can own both their new home and their old home. Eventually, the homeowner will sell their former abode, using those proceeds or some of the proceeds as the down payment on their new home.
How Bridging Finance Works
Although you can use a Bridging finance institution to provide the funding for your new home without having a firm offer on your old home, it is easier and safer to secure bridging financing when you have a firm offer on the home you want to sell and you have made a solid offer on your new house. A financial institution that has a Bridging finance program will usually allow the homeowner to use 80% to 90% of the equity in their home as the down payment on their next one. With a bridge loan, you have a mortgage on both homes. Once the other home is sold, you use the proceeds to pay off the bridge loan and the fees and costs associated with it.
Benefits of a Bridging Finance Company
Working with a lender that normally handles the ins and outs of Bridging finance is important due to the fact these companies are setup to work with you and meet your needs immediately. The process of Bridging finance is different than that of financing the simple purchase of just a home.
Bridging Finance Has Challenges
Companies that operate in the realm of Bridging finance fill an important need. But it's important to understand that there are specific challenges to homeowners who require this type of financing. The biggest challenge has to do with the costs of the Bridging finance process. Interest charges for this short-term loan are relatively high as the rate is usually the prime plus one to three percent. For Bridging finance loans that have a term of a year of longer, homeowners will often be required to pay six months worth of interest upfront. The setup fees can be hundreds of dollars and you may be required to pay for new mortgages on both of your homes. All of these costs can add up.
Be Sure of Your Prospects
Bridging finance works best when the homeowner is sure of the outcome of both deals-the selling of one home and buying of the other. If the deal falls through on the sale of your home, it could end up costing you thousands of dollars and you could even lose the home that you have offered as collateral.
Work with an Experienced Company
Because Bridging finance is a complex process, it is important for you to utilize a company that understands the entire process of Bridging finance. This will give you the best chance for success. Shop around for a company that has experience, offers competitive rates and will work with you.