Bridging Loans Bridges Time Gap

The bridging loan helps to bridge the gap that suddenly yawns between the selling of an old property and the purchasing of a new one. It is a temporary staff to lean on. The length of the gap may vary taking into account the availability of the next fund. Generally these loans are for those dealing in real estate. Real estate means generous funds. With development on the rise bridging loans too are in great demand.

Bridging loans fall under two categories – the closed bridging and the open bridging. The closed bridge variety is for those borrowers have already formalized papers for the selling of the existing property but have not received the cash as yet.

The alternative of open bridging is for those geared and ready to buy a property but has not yet finalized the details of the sale of the existing unit. The lending body will ask some relevant questions related to the condition of the house, the mortgage offer on the new unit, the details and proof of the fact that steps are underway to sell the current house.

In the case of the open bridging loan the borrower is exempted for 12 months allowing for renegotiation. After expiry of that term the property is regularly negotiated until the loan is cleared off.

It is well to bear in mind that a bridging loan comes with a high rate of interest – the standard being fixed by the apex lending authority. There are specialized lenders who deal exclusively with these types of loans and working with them gets the work done speedily. A qualified broker will be of invaluable help to make the process swift and smooth. Comparison can be made before deciding.

It is up to the discretion of the borrower to weigh the scales and calculate the importance of the bridging loan. If without funds an important valuable property slips out of one’s grasp then it is foolish not to take the help of a bridging loan. The value of the property bought at a critical point of time will offset all other losses.

The new property is kept as security or collateral with the lender. The interest varies according to the value of the property and the profile of the borrower. Basically a bridging loan is a short-term mortgage but more expensive than the usual mortgage because of additional work and speed involved.