Upgrading? Bridging loans and more explained

There’s a lot of truth to the saying that timing is everything but sometimes this isn’t the convenient case when it comes to upgrading your home. In a perfect world you’d ideally sell your home at the same time as buying your new one but as it turns out, this doesn’t actually happen very often. This often means you have to buy your dream home before you sell your immediate one. This is where bridging loans spring into action; having access to a bit of borrowed money means you can manage to afford those two properties simultaneously so you can get all your affairs in order.

As it turns out, bridging loans are more flexible than one may initially think. Although a bridging finance loan often has a shorter term than traditional loans it gives you the option of having either a fixed or variable rate. However, just as there are pros to this process it’s important to recognize there are a few cons as well. If you don’t understand the entire process then you could actually make your circumstances more difficult than they already are.

On the other hand, if you work with the right lender you can find a great fit because they’ll adjust your loan according to your real life situation, taking into consideration how risky it may be. Always remember that before you sign up for this sizeable commitment you need to know what exactly it is that you’re signing the dotted line for. What are the minimum repayments? What’s the interest rate?

Not only this, but how do you really ensure you understand all the underlying factors? Our main piece of advice is to invest in someone who understands the actual investment. Hiring a financial advisor should never be underestimated. As well, a mortgage broker can help inform you about the entire process and what you can expect on a month-to-month basis. More than anything, you’ll really feel like you’re making an informed decision whether you settle on yes or no.

Always consider whether you’re the right kind of client for bridging loans. Remember that they cater to people who only need short term access to cash so they can complete their new property purchase before selling their current home. It literally allows you to bridge the gap in what can otherwise be a pretty stressful financial situation. If you sign up for a bridging loan then you should be ready for costs as high as 1.5% per month, summing up to as much as 18% within one year.

Also remember that bridging loans do not provide a one size fits all solution because each person’s scenario is simply so unique. Doing your research will pay off so you can use this short-term loan to help solve your long-term plans. 

Cristy Houghton