Bridging Loans Scenarios
You can feel like youre up against a brick wall when it comes to financing for your property
. Whether its a rehab project or an auction purchase, traditional lenders will deny you. But theres an opportunity to create cash flow there and you know if you had just the right source, an unacceptable property can be a profitable investment. One way to make that happen is to obtain a bridging loan.
The major difference that bridging loans have are:
Give the ability to close quickly
Funds able to be arranged in 24 hours
Funding can be available to you as early as a week in certain situations, but 3-4 weeks for most cases
Terms are typically at the most 12 months
Higher rates and points than conventional
Both commercial and residential purchases are considered
Bridging finance creates possibilities for financing where traditional ones would turn down. Because the rates are so high, it is too expensive to consider for the long term. Although it is risky and expensive should the purchase go south, there are many times when it pays its dividends. Here we list the positive aspects of using a bridging loan in different scenarios:
Auction Purchases
Didnt lose deposit (a 10% deposit is usually required)
Able to complete the transaction quickly
Make a significant profit by moving fast on an extremely under market value homes
New Home Purchases
Able to negotiate a higher sales price for existing house by not having to be under a time crunch to sell
Peace of mind of not having to simultaneously have home sales and new purchases coincide
Immediately able to make an offer before competition
Negotiated lower sales price for new home by ability to move quickly into the deal without any subject to clauses or contingent clauses that other buyers may have (which is more appealing to a sellers). Also, closing date can also be flexible which is very attractive to sellers.
Major Rehab Investor Projects
Gain financing even though the project is in need of a significant amount of major repairs (this would be a property that would be in such a bad condition that traditionally wouldnt be considered)
Profit from being able to buy at a discounted price
Personal Home Sale
Creates the opportunity to have the time to renovate or refurbish prior to being on the market
Higher profit can be achieved through renovations and refurbishments
Commercial Property
Move ahead with a transaction to buy a new one while existing is still on market
Increase profitability by not being desperate to find a buyer
Regardless if other resources are denying you, there are still other options. Bridging finance creates possibilities to gain your new home purchase or for investors, rehab project. This article listed a few different advantages in several scenarios, but its not limited to just those. If you think you have potential opportunities to create a profit benefiting a lender, this might be the right choice for you.
by: Oliver Smith
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