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We all have heard lot about bridging loans but very few know about the exact cause and reason when to go for these loans. In this article we will discuss about bridging loans and its aspect from every possible angle. Bridging Loans as the name suggest is the monetary benefits bridging the two gaps of a transaction that to be suited in one deal. I would try to make it more easy by making it little simpler. Bridging loans are used to fill the financial need when you are sure that within a span you will be having sufficient amount to bay the debt back. Let us understand it with an example…. Suppose you are planning to change your house or buy a new real estate property. And it is well known that rates of property are too high. In the case either you would have having too much money or you need to sell your old property to acquire the new one. Here comes the help of bridging loans. Your lender will provide you the amount to buy the new property on the other hand you can try selling your old property. When the later is sold back you can pay the amount back to your lender. This is the all funda of bridging loan. This is quite natural that homeowners who desire to modify or change their present living location often find themselves looking and dealing for a new house at the same time when they own their later home. And when they finally shift to the new location then sells the old house. But the question is how to pay the huge amount, the answer lies in the bridging loans. Now I am sure that you all might be clear with the point and functionalities of bridging finance. Traits of Bridging Loan
• The motive of a bridging loan is to assist a homeowner acquire another house prior to his current abode is sold out.
• With the help of bridging loan, the cash is used to pay off the existing mortgage balance on the owner's home.
• The amount left is used as a cash down payment for the new home.
• With Bridging loans buyer also has to get a mortgage for the latest property acquired. Terms and Structure of the Bridging Loans
• Bridging loans are measured as a immediate but short term financial help in the mortgage industry. •
• With this kind of loan, you normally get a year to pay it off.
• In the first six month you not need to pay even interest •
• After the first six months of the loan, if you were unable to sold your house you need to start paying interest
• If you instantly sell your house you can pay the money back quickly attracting the least and by-default interest only.
• Generally carries higher interest rate Bridging loan can give you the money you need to buy a house before you are technically ready to buy, it is an expensive proposition. But it is the help when needed the most. Mike John is a well known Financial Consultant. He provide useful advice through his articles on Bridging Loan and Bridging Finance.
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