Are you planning to get a new home, but you’re still struggling with the down payment?
Well, bridge loans might be for you.
It refers to short-term financing until a person or organisation obtains permanent funding to pay off existing debt. In this case, having bridge loans will allow homeowners to borrow against their current property to deposit a new home. Furthermore, when the borrower’s former house is sold, the profits may be used to pay off the bridge loan, leaving them with only their new property’s mortgage.
But this isn’t the same if the borrower’s house does not sell within the loan period. Under the bridge loan contract, a homeowner will be held liable for making payments on their new home’s mortgage, the bridge loan, and the former home’s mortgage. Hence, it makes bridge loans a little bit risky.
Here are a few of the meticulously compiled tips for you in getting a bridge loan.
Tips On How To Get A Bridge Loan in 2021
1. Finalise your decision before getting a bridge loan.
Getting a bridge loan should be a well-thought-out decision.
It means that you will have to risk being a real estate owner, so you will have to consider many variables before you finally get the loan.
So, a bridge loan is for you if:
- You have finalised the new home, and your former house is in a seller’s market where the home purchase is quick.
- You are eager to have the house, and the seller refuses to accept an offer that is dependent on your current home’s sale.
- Your money is not sufficient to afford a down payment unless you sell your current home.
- You want to own the home prospect before selling your old home.
If your reason for getting one is not here, then a bridge loan might not be for you. It has some disadvantages, like a higher interest rate than other types of loans. It also has an additional cost because you will have to pay for debt service aside from the current mortgage.
2. Know the lender that best suits your needs
If you finally decide to get one, it’s time to find a lender.
There are lots of private lenders and high street banks that offer bridging loans.
Most of these are only accessible via loan brokers since most high-street banks do not provide bridge loans directly to the public. For instance, there’s the HSBC Bridging Loan, NatWest, Bank of Scotland, Lloyds, Santander, RBS, and NatWest.
You also have to know which banks will provide you the best interest rate, one way to find is to search for bridge loan calculators to compare deals.
3. Approach a loan broker.
As mentioned above, banks usually don’t offer bridging loans to the public. High-street banks separate the subsidiaries that handle these kinds of loans and would only be accessible to brokers. You can ask for referrals from family, friends, and even your real estate agent.
The wise choice would be to approach an experienced broker like https://www.bridgingfinanceloans.co.uk/ that specializes in short-term lending like bridge loans, development loans, etc.
Things you need to consider before you get a bridge loan
Do not make a hasty decision on getting a Bridge loan
Before applying for any type of financing, it’s best to shop around and compare your options. Comparing different loan products through a rate comparison calculator can help you determine which loan is the best for your needs.
Find out if your lender will require you to prepay existing loans
When approved for a bridge loan, some lenders might require you to sell your current home before completing the financing of your new one. If this is the case, you will need to negotiate with your current mortgage lender in advance in order to avoid any obstacles in paying off both loans at the end of the bridging period. However, there are lenders that do not require this at all, which is why its very important to find a lender that suits your situation.
Bridge loans can be risky
Risk is also another factor you have to consider when it comes to bridge loans. Since these loans are short-term and have a higher interest rate compared to traditional loans, it’s important to make sure you’ll be able to sell your old property before the end of the bridge loan’s term. If you can’t, you will have to continue paying for both of your existing loans. It is for this reason that it is always best to consult a professional before getting a bridge loan.
Get Guidance from Professional Brokers
Have you decided on getting a bridge loan? Don’t fret. After you understand how this all works, we will further guide you throughout the journey of getting your bridge loan. So enquire with us and get a free quote today.