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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.
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So, you have made the decision that you would like to become a homeowner. As lenders, we have to perform a credit check. The credit we review are provided by all three reporting agencies. Equifax, Experian and Transunion are the three agencies lenders use. The middle of all three beacon scores is the one used to qualify a borrower for a mortgage.
Mortgage Calculator ? How to Calculate Your Monthly Mortgage Payment
Just starting to shop for a new home? Do you want to know how to figure what your monthly payment would be based on a certain priced home? No problem, there are plenty of mortgage calculators on the web you can use free of charge (click here for an example of one). All you need to know is the mortgage amount, sale price less the down payment, interest rate (also easy to access on the web), and the number of years you wish to finance your new home, usually 30 years (360 months) is the maximum term. Simply input those numbers into the mortgage calculator and voila you have your monthly payment calculated for you. Can you see the advantage of knowing what your approximate monthly payment is going to be while your home shopping?
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Multi Family Property Living
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Home Loans ? Would You Buy a Home Without an Inspection?
The housing market has exploded, with home prices rising beyond all reason in some markets. Home prices have doubled or tripled during the last five years, and in some cities, the asking prices for homes are considered only to be suggested opening bids. Homes often sell in a few days or even hours, and would-be buyers are tiring of losing out to higher bidders. In order to achieve an advantage over other bidders, some people are offering to buy homes without a professional inspection. What do they gain from such an offer? Is declining an inspection an OK thing for a buyer to do?
What is a Remortgage?
A remortgage is changing your mortgage without moving your home. Remortgaging is the process of switching your mortgage to another lender that is offering a better deal than your current lender thereby saving money. A remortgage can also be used to raise additional finances by releasing equity in your property.
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