Mortgage and Refinancing Information Channel:
We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
Bridging Loan Basics
A Bridging Loan is a short-term loan used as a way to provide funding for the purchase of a new property while the borrower awaits the sale of an existing property. Unless all the stars are in perfect alignment, it's tricky to coordinate the sale of one property and the purchase of another property in such a way that the transactions occur simultaneously.
A Bridging Loan or "Bridging Finance" as it is also commonly known, makes such transactions possible. They keep the borrower from getting stuck in a rough financial corner, which typically means being forced to pay two mortgages at the same time. Bridging Loans can be used either for commercial or personal reasons.
Short term in nature, the application process for a Bridging Loan is similar to that of a standard loan. Most importantly, it's advisable to work with a lender that is experienced with this type of loan. Plus, as the need for a Bridging Loan often arises with little advance notice, being pre-approved for such a loan is a smart move.
Bridging Loans are usually interest only meaning that the borrower pays only the interest on the loan each month. The borrower continues with this repayment plan until the property the loan is being used for is sold. When the sale finally does occur, the proceeds of that sale are used to repay the principal. The principal payment typically is in the form of a one-time, lump-sum payment.
The lender need not be too concerned about default because the borrower is required to put up collateral to secure the loan. This is typically in the form of another piece of property. But rest assured the lender will still thoroughly review the credit history of the applicant, the business and any partners or others with an ownership interest to assess the level of risk it is undertaking. Poor credit however need not be an obstacle.
The interest rate on a Bridging Loan is based on several key factors: the potential risk associated with the loan, the current interest rates and a premium added by the lender. As Bridging Loans are short-term, generally not longer than two years, and in most cases only a metter of months, the lender has only a short time to make a profit on the deal. The profit is derived from the interest rate.
Expect to pay a higher rate of interest for a Bridging Loan. And remember, the monthly payments are generally interest only. You should also expect to pay off the Bridging Loan in full, usually as a one time payment, as soon as the property is sold.
In the off chance that the property is not sold before the Bridging Loan matures, it can usually be converted to a conventional loan without a payment penalty. But as ever you should not assume this is the case and be sure to check with your lender that this is an option if circumstances call for it.
About the Author
This article comes with reprint rights. Feel free to reprint and distribute as you like. All that we ask is that you do not make any changes, that this resource text is include, and that the link above is intact.
MORE RESOURCES updated Sat. March / 06 / 2021
Today’s mortgage refinance rates mixed — one key rate drops while another rises | March 2, 2021 - Fox Business
Today’s mortgage refinance rates mixed — one key rate drops while another rises | March 2, 2021 Fox Business
Can refinancing a mortgage hurt my credit score? Fox Business
Today's mortgage refinance rates see little change as market holds steady | February 25, 2021 - Fox Business
Today's mortgage refinance rates see little change as market holds steady | February 25, 2021 Fox Business
Best cash-out refinance lenders in 2021 Bankrate.com
3 signs you should refinance your mortgage right now Fox Business
Mortgage Recast: How to Reamortize and Save Money Credible News
Today's mortgage and refinance rates: February 14, 2021 | Rates down Business Insider
What Is a Mortgage and How Does It Work? | Mortgage 101 The Mortgage Reports
What Are The Benefits Of Cash-Out Refinancing? Is It Worth It? The Mortgage Reports
Can Closing Costs Change On The Closing Disclosure? The Mortgage Reports
Can You Use A 203K Rehab Loan For An Investment Property? The Mortgage Reports
The Lending Issue: Ready, Set, Close! Chicago Agent magazine
Top 5 mortgage refinance questions answered Fox Business
How to decide if you should refinance your mortgage Fox Business
Pros and cons of a cash-out mortgage refinance Fox Business
How to refinance your mortgage Fox Business
4 ways to maximize your mortgage refinance savings Fox Business
Mortgage refinance: Everything you need to know Fox Business
How do I get the most out of my mortgage refinance? Fox Business
Who's exempt from the new mortgage refinance fee? Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now - Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now Fox Business
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 - Forbes
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 Forbes
Mortgage refinance applications soar despite a new fee that increases the cost - Pittsburgh Post-Gazette
Mortgage refinance applications soar despite a new fee that increases the cost Pittsburgh Post-Gazette
What are the hidden costs of refinancing a mortgage? Fox Business
USDA Construction Loans | Buy Land & Build A Home With USDA The Mortgage Reports
4 ways to get lower mortgage refinance rates Fox Business
The best mortgage refinance lenders of March 2021 Business Insider
Despite low mortgage interest rates, homeowners should research the caveats before reﬁnancing - Seattle Times
Despite low mortgage interest rates, homeowners should research the caveats before reﬁnancing Seattle Times
A record 19.4 million homeowners can now save big on a mortgage refinance, as rates hit another new low - CNBC
A record 19.4 million homeowners can now save big on a mortgage refinance, as rates hit another new low CNBC
5 reasons to refinance your mortgage right now HousingWire
Complete Checklist of Mortgage Refinancing Requirements Credible News
10 things to know before refinancing your mortgage Fox Business
Refinancing your mortgage? Don’t make this mistake Fox Business
3 Mortgage Refinance Strategies to Consider in 2021 The Motley Fool
How a mortgage refinance affects your net worth Fox Business
10 tips for getting the best mortgage refinance rate, from checking your credit report to choosing the right lender - Business Insider
10 tips for getting the best mortgage refinance rate, from checking your credit report to choosing the right lender Business Insider
Today’s mortgage refinance rates climb upward — though one key rate holds steady | October 23, 2020 - Fox Business
Today’s mortgage refinance rates climb upward — though one key rate holds steady | October 23, 2020 Fox Business
Jumbo Mortgage Refinance Rates for March 2021 NextAdvisor