You really have found a great property to invest in but you need to be very swift in decision making to get hold of this fabulous opportunity. One of the things that you have decided is to sell your old house in the town and get the cash to finance this new home. The idea is correct but to implement it you need some financial institution to provide you quick loans.
Bridge loans are precisely these. They help you bridge the gap between an opportunity lost and an opportunity gained. If you are struggling for liquidity then bridge loans would ensure that you get the required amount swiftly and you don’t miss the bus.
How is a bridge loan different from a home loan?
Bridge loan is typically for shorter duration for financing real estate. You need to go through a lot of financial documentation and approvals to get your home loans sanctioned. If you really waited for that much amount of time then you will never be able to utilise an available chance. Bridge loans come primarily in 2 types Closed Bridge loans and Open Bridge loans.
The concept behind Open bridge loans is that you need a pre-defined exit for your loan. So what happens if you default the monthly loan EMI. The bank needs to have rights on your property to reimburse the amount if it gets defaulted. This is a secure mode for the lender because there is a guarantee that they will recover the money provided to the borrower. The rate of interest is also comparatively lower than closed bridge loans.
Closed Bridge loans don’t have a pre-defined exit. Which means the bank or the lending institution doesn’t have any established means of getting money from the borrower in case of default payments. This is very risky for financial institution. This option typically has higher rate of interests. Closed Bridge loans are offered for very short durations ranging from 1 day to 6 months.
As a borrower, you would need to choose the best suited option for you. So, if you ever face a liquidity crunch for investing in real estate then go for Bridging loans.
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Not only to invest in real estate but people are using the bridge loans to run their business. They are purchasing different short term loans for their business. Even I have purchased a short term loan from Acumen Finance to run my business.
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