Bridging Loans For South Africans

3. Bridging Loans

A Bridge Loan? Don’t worry. A bridge loan is not something that you pay if you can’t afford the toll at the bridge! A bridge loan is actually a type of short-term loan. It is money that can be allocated that you can use as a way of securing short term financing. Although it comes at a high interest rate, you can use a bridging loan to help you segue from one property that you may be purchasing to another. And there are other great ways to utilize this loan. No toll roads required!

How Can Bridge Loans Help Me?

Originally set up to ensure that when you’re selling one property and you need to have a little bit of financing to help you get into another property, what a bridge loan does is it secures a an allocated amount of money that you repay back in a quicker time frame than you would a longer, more traditional loan. Keep in mind though, this type of loan will have a higher interest rate and you may have to pay more in fees. You may also have to pay interest rates that are higher and set up charges. With a bridge loan though, the point is that you’re able to utilize this block of money to ensure that you can get from one loan to the next.

Who is a Bridge Loan Best For?

A bridging loan is good for a person who may be selling their house and in selling your house you may be trying to use money from selling your home as a down payment with the new home and that’s an area where you need a bridge loan because what the bridge loan does is it secures a certain amount of financing to help you to get that new home before another purchaser does and then while you’re close out your old home, the money that you receive when you close you can pay out the old loan and pay off a bridge loan and then you’ll have your down payment for your new house.

When you use a bridge loan its a way to rest assured that you can make the purchases that you need. Although it’s a good investment to have a bridge loan what you have to keep in mind is that the rates may be hire, and fees may be higher than your lender for a traditional 30 or 15 year fixed mortgage loan. You may also have to pay costs associated with fees and come up with some form of collateralization or they may ask for a loan to value ratio. On the other hand because the interest rates are higher and you are paying more in fees, you may find the arrangements may be relatively easy to pursue and to obtain a bridge loan. You may find it you get the money faster than you would with a traditional own.

Who Can Use a Bridge Loan?

A great example of someone who might use a bridge loan is a developer who is pursuing a project and is waiting for his permit to be approved. Another example is a bridge loan that can be used for construction projects where the financing is taken out to complete a project because we know that once the actual construction is completed, the property is sold, people move in, and the money can be paid back. Another area where bridge loans may be beneficial is for a homeowner who is considering buying their first home but are utilizing money that may be tied up in another area. This bridge loan can help them until their financing is freed up and then they can use the money towards a down payment. The bridge loan is a way to secure and bridge the gap, so to speak, to make sure that they don’t lose that new home. Their new residence is not in jeopoardy while they are waiting for the other funds to come in.