Have you ever been stuck in between a new property and the old one, paying both mortgages. Paying two mortgages can be challenging, especially when it is not planned. Thankfully, Bridging Loans have been created by lenders to help solve this challenge.
Bridging Loans are temporary term Loans that help to Bridging this lag time between the closing of the present property and the closing of the new home. Despite this not being a common scenario, under a few occasions there is an extended time period than was originally anticipated. The Bridging Loans assists the property owner to cover their simultaneous mortgage costs, with the proceeds from the Bridging Loans being used for the down payment on the new property once it has closed.
The Bridging Loans Process
As with any home mortgage, the buyers must go through underwriting for approval for a Bridging Loans. Every lender will generally have their own underwriting guidelines that must be followed in order for the owner to be approved for the Bridging Loans. And, these qualifications are generally more lenient than traditional home financing when it comes to debt to income ratios, suggesting that these ratios can be greater than with traditional mortgage Loans.
The reason that there are varying requirements associated with a Bridging Loans is that they are temporary and generally designed to help a buyer in moving from their current property into their new home. And, the funds from the Bridging Loans are almost always applied to the new property Loans if they are not used during the waiting period before to closing on the new property.
Benefits of Bridging Loans
There are several advantages to the property buyer of Bridging Loans, including:
• It allows the home owner to place their property onto the market faster than normal and generally with less restrictions than if they didn’t have the additional financial protection.
• Many Bridging Loans do not require monthly mortgage or Loans payments, giving some financial relief to the existing property owner.
• The Loans can give the property owner some flexibility with contingencies on their home sale, allowing them to reject offers that are not favourable without financial fear of carrying two Loans in the circumstance that their new home closes on time.
Disadvantages of Bridging Loans
While there are several advantages to using a Bridging Loans when selling or buying properties, including:
• The fees associated with Bridging Loans are often higher than traditional home Loans and even home equity Loans.
• Some home owners might not be approved for a Bridging Loans due to the lending requirements
• Even though the Bridging Loans assists the home owner in paying the mortgage costs throughout the transition process between properties, they must still financially cover for both Loans and the interest that is accruing on the Bridging Loans.