Homebuyers and investors use bridge loans as a temporary finance option until they can get long-term financing. It is a short-term loan that can mature anytime between six to 12 months. If you are taking out this loan, you will receive funding for a short time that you can use for closing on a property while you are waiting for your old property to be sold. In this article, you will learn more about the benefits of short term bridge loans:
- No Income Statement Required
If you take a bridge loan from a private lender, it will be exempted from federal regulations meaning that you don’t have to provide a credit score or income documentation. So, you can put the money you get after selling your existing property towards making payment for the loan.
- Quick Access
Bridge loans are funded privately and are secured according to the value of the property. This is why lenders don’t take credit rating into account. This is also the reason why these loans are approved faster than your traditional loans. The average time for assessing and approving bridge loans from a private lender is about 3 to 7 days.
- Flexible Options for Repayment
Hard money lenders are usually accustomed to issues associated with the fix and flip projects and have an exit strategy that takes longer than what was previously determined. For cases like these, payments can be made or deferred into an interest payment-only arrangement until the existing property is sold. Different types of bridging loan providers will have different lending criteria. In most cases, bridging lenders don’t consider your income, credit history, and affordability. However, they do consider the value of the property that you are offering as security along with the exit route. The exit route is the method through which you will be repaying the bridging loan either before your term ends or at the end of it.
- Multiple Options for Security Property
You can secure a bridge loan against houses, shops, flats, mixed-use properties, maisonettes, commercial units, care homes, offices, farms, leisure complexes, land, development land, building plots, etc. This property can either be leasehold (even when only a short time is left on the leasehold) or freehold. Also, the bridging finance facility can use more than one property as security which can be either a first charge or second charge basis, or even a combination of both. So, this means that you can set up a bridging loan by using the first change on the property that is to be purchased combined with the second change on a mortgaged property that has equity available.
The right type of financing for you will depend on your overall goal, your financial situation, your geographic location, and the state of the housing market. For people looking for a financing option for a distressed property, a fix-and-flip, or a rental property that is not producing income yet, the most reasonable solution is getting a hard money bridge loan.
One thing to remember is that when it comes to real estate, short term bridge loans can be a lifesaver. This short-term financing option can be your way of securing your new home successfully. But, before you secure a short-term bridge loan, make sure that you know all the facts so that you are able to minimize the risk and maximize the chances of success.
