Bridging Finance Basics

Bridging finance is a short-term loan that is used as a way to provide funding for the purchase of a new property while the borrower awaits the sale of an existing property. Unless all the stars are in perfect alignment, it's tricky to coordinate the sale of one property and the purchase of another property so that the transactions occur simultaneously.

Bridging finance or a "bridge loan" as it is more commonly referred to, makes such transactions possible. They keep the borrower from ending up in a dire financial situation as can happen when forced to pay two mortgages at the same time. Bridge loans can be used either for business or for personal reasons.

Primarily short term in nature, the process for obtaining a bridge loan is similar to that of most types of loans. Most importantly, it's advisable to work with a lender that has experience with this type of loan. Also, since the need for a bridge loan often arises with little advance notice, being pre-approved for such a loan is a good idea.

Bridge loans typically are structured as interest only loans meaning that the borrower pays only the interest on the loan each month. The borrower continues with this repayment plan until the property the loan is being used for is sold. When the sale finally does occur, the proceeds of that sale are used to repay the principal. The principal payment typically is in the form of a one-time, lump-sum payment.

The lender does not need to worry too much about default because the borrower is required to put up collateral to secure the loan. This can be in the form of another piece of property, business machinery or inventory on hand. But rest assured the lender will still thoroughly review the credit history of the applicant, the business and any partners or others with an ownership interest to assess the level of risk it is undertaking.

The interest rate assigned to the bridge loan is based on several factors: the anticipated risk associated with the bridge loan, the prevailing interest rates and a premium added by the lender. Since bridge loans are short-term, generally not longer than two years, the lender has only a short time to make money on the deal. The profit is derived from the interest rate.

Expect to pay a higher rate of interest for a bridge loan. And remember, the monthly payments on a bridge loan generally will be for interest only. Expect to pay off the bridge loan in full, usually as a one time balloon payment, as soon as the property is sold.

In the event that the property is not sold before the bridge loan matures, it can usually be converted to a conventional loan without paying a penalty. But it's always a good idea to double check this before assuming.

Need to source the best Bridging Finance available quickly, try independent commercial brokers Commercial Lifeline, specialists in Commercial Bridging Finance and Commercial Mortgages.

Download our free Commercial Mortgage guides by visiting our Commercial Mortgage Guide page.

This article comes with reprint rights. Feel free to reprint and distribute as you like. All that we ask is that you do not make any changes, that this resource text is include, and that the link above is intact.

---

Types of Home Equity Loans

There are at least two types of home equity loans.The... Read More

Financial Rebirth Through Remortgage

Seldom in ones life do we get a chance to... Read More

Home Mortgages: Think Before You Borrow

In today's overheated housing market, lenders are making it easier... Read More

A Guide to Getting Bad Credit Home Improvement Loans

You might be wanting to look into bad credit home... Read More

Mortgage Brokers or Banks: Which is Right For You?

When you're looking for a home loan, you might work... Read More

Home Loans and Mortgages ? The Selection Can Be Bewildering

For years, when someone wanted to purchase or refinance a... Read More

Sound Financial Standing Entails Capital Raising Remortgage

Raising capital is integral for growth and expansion of an... Read More

Consolidate Debt With A Home Equity Loan

If you are a home owner who is having to... Read More

Lesser Known Facts About Home Equity Loans

Refinancing your debt via a home equity loan shifts your... Read More

Home Equity Loans 101

A secured home loan differs from an unsecured loan in... Read More

How to Get Cheap Home Loans with a Bad Credit

It's been years since you made any major improvements to... Read More

I Have A Slice of the American Dream and It is a 30 Year Nightmare

Well, we did it. We are buying a beautiful, brand... Read More

5 Home Buying Essentials

Purchasing a home involves certain important, even essential, steps that... Read More

Real Estate Mortgage Loans Online

Online real estate mortgage loans enable borrowers to be sure... Read More

Zero Down Mortgage Loans - Is 100% Financing a Good Idea and Can You Get Approved?

Are you wondering if you can get approved for a... Read More

Total Cost Of Credit vs Monthly Payments

I read a press release the other day which points... Read More

Home Equity ? Let the Market Eliminate Your Private Mortgage Insurance

In decades past, most people who were interested in obtaining... Read More

How To Get a Mortgage If Youre Self-Employed

If you are self-employed, work on a contract basis, or... Read More

A Home Equity Loan - What You Should Know?

Asking yourself, "Is a home equity loan right for me?"... Read More

Need Mortgage? Alternative Finance Often Masks Predators, Who Want to Steal Your House

So, your bank had just turned you down for a... Read More

Ten Things a Mortgage Processor Must Know to be Effective

From time to time, we hear a story about a... Read More

Bad Credit Mortgage Loans ? How To Get Approved

Persistence is the key working toward getting approved for a... Read More

Refinance Mortgage Rate and Mortgage Rates

Refinance mortgage rate is the best rate available to qualified... Read More

Home Mortgages: Should You Apply Now?

If you're thinking about applying for a new mortgage or... Read More

Mortgage and Credit Card Companies Under the Spotlight on Consumer Charging

For the first time since May 1996 reports have indicated... Read More

For Mortgage-Refinance Help, Get the Best Mortgage Professional, Not a Bank Loan Officer

When you need a mortgage -- either because you are... Read More

Home Loan Refinancing - What Lenders Dont Want You To Know

Refinancing lenders seems to hold all the cards. They have... Read More

How Much Home Loan Can I Afford?

Have you ever asked yourself how much home loan can... Read More

Interest-only Mortgages Have Their Pitfalls

Rising home prices, particularly on the East and West coasts... Read More

Home Equity Loan - Is It For You?

A Home equity loan has become an easy way to... Read More

Secrets Your Banker Wont Tell You - Which Loan is Best for You?

Recently I was driving in my Car and I heard... Read More

What Are Mortgage Brokers And Why To Use One

"Mortgage" is formed from two words: the French word "mort"... Read More

How to Buy a Home Without a Down Payment

Mortgage rates are rising and it's becoming more difficult for... Read More