In a new age of finance, it’s hard to keep track of all of the different loans, interest rates, and compounds circulating the system. If you’re looking to get into a new home fast, it might be good for you to invest in a bridging loan. But first, what are they? And how do you know if they’re actually right for you?
Bridging loans differ from other loans because they tend to be based solely on high lump sum short term loans. Meaning that you’re dealing with a larger amount of money, but you only want to take out that loan for a short period of time and pay it back sooner rather than later.
A good example of these bridging loans would be trying to buy a house at an auction. Because you need to have money upfront to hold your bid on the house if you win, you need to have the money ready. If this seems impossible on the day of, you can take out a bridging loan, and pay back the money once you’ve settled on the house.
Most bridging loans, or “swing loans” will last for a period of time usually ranging between two weeks and three to four years. Because they are shorter time frames, it’s common that the interest rate will be higher than the interest rate of a mortgage or other long-term loan.
However, it’s simply because the usage and application of this loan is not the same as that of a long-term loan. Bridging loans have a specific purpose as well. They are highly applicable to down payments and holding costs, because you might be able to get that money in less than a year, but simply don’t have it that day.
So, now that you know a little bit more about what bridging loans are, now it’s time to ask yourself the question, are they right for me? If you’re looking to get a loan on a house that you won’t be able to pay back for 10-15 years, they’re probably not what you’re looking for.
The interest rate will be too high and there’s probably a better option out there that is worth researching. However, as previously mentioned, if you are looking to buy a house through an auction and win your bid, it will be required that you give a lump sum of money to the agency in order to reserve the home and keep it off the next auction.
In this scenario it would make more sense to take out a bridging loan and pay off that investment within the next couple of years.
If you’re looking for bridging loans in the UK or developmental finance loans I would suggest checking out these guys. They have competitive interest rates and will be able to connect you with the best financial plan for you. If you’re looking for something a little more long term than 3 years, it would be wise to spend some time looking at their developmental loans.