Efficient Bridging Loans

Bridging loans are also known as caveat and swing loans in some applications

. This type of loan is termed as short term loan. This is a good type of loan for emergency financing because you can take out the loan for the period of two weeks to three years. Bridging loans can be generally used during interim emergencies until the next stage of financing become available. The loans are expensive with higher interest rate, but they can be arranged in a shorter time with little documentation. There are different uses of bridging loans that are explained in this article.

Real Estate- Bridging loans are often used; when you need to purchase a commercial real estate, or you want to take short-term advantage of securing long-term financing. If you have obtained bridge loan on a property, than you can pay the loan after the property is sold. In many cases, the loan is paid back when it is refinanced with a traditional lender or if the borrowers credit improves, or when there is the permanent financing to occur. In this case, hard money loan and bridging loan are similar to each other as they overlap each other. These types of loans are understood as non-standard because they are obtained for a short time due to unexpected circumstances.

A characteristic of Bridging Loans-The interest rates for these types of loans is between 11-15% for twelve month period. There is no fixed payoff date, however, in some cases it is to the discretion of lenders on how they want you to pay. The first charge bridging loans, are made available at a higher loan to value ratios, because there is less risk involved. The second charge lending often requires higher risk and, therefore, most UK lenders clear concept of second charge lending before proceeding ahead with the application.

The use of bridging loans- Developers usually obtain bridging loan to complete a project during the transition period before the final approval. A specialised lending source might offer the loan at high interest rate involving risk, if there is no guarantee approved for the project. Once the project gets approved or entitled than the project automatically gets eligible for other types of loans with lower interest rates for a greater amount. In this case bridge loan, can be obtained with the help of construction loan and finance the completion of the project.

The second example of using the Bridging loans, is when the new residence is purchased, and there are plans to sell the existing property. In this case, the bridge loan helps the buyer to take the equity out of the existing residence to utilise it as a down payment on the new home. This can be done when the current home will close in a short period of time, which will help, to pay the bridging loan. More information on the effective use of bridging loan can be found on www.belgraviacommercial.co.uk. It is hard to write all the detailed information in one article. Please click on the above link to read more about bridging loans.

by: Oliver Smith

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