You may have thought a lot about buying a new property, planned things in a proper manner but if a small loophole arises, then all the planning goes in vain. A sudden cash gap may spoil the whole deal. To take care of cash gaps, bridging loans can be employed by the borrowers.
are the loans that are available to borrowers to fill the gaps that occur during sale and purchase transactions of property. These gaps may be created due to delayed sale of older property or due to delayed receipt of payment for the earlier property.
Bridging loans are short term loans that are available for a term of 1-12 months. They are taken up to close property deals of borrowers. They are secured in nature, which keep the older property of the borrower as collateral. They can be availed in two forms:
&bull Open end bridging loans: they are available to the borrowers who have not yet completed the deal of their earlier property but want to buy new one. Therefore they need money for the purchase. The loan is repaid when they sell off their older property.
&bull Closed end bridging loans: for the people who have already sold off their older property but only a delay in the receipt of the payment has occurred, closed end bridging loans are available.
Bridging loans are available at a higher rate of interest since it is a short term loan involving high sums of money. Also, it is an interest-only loan which means that the borrower is just required to pay only the interest every month. The principal can be paid as a lump sum when the payment of the property is received before the repayment term of the bridging loans ends.
Bridging loans can also be availed by borrowers who have CCJs, arrears or defaults which cause a bad credit history. Since they are secured loans, bad credit borrowers can avail them at low rates of interest.
Now that such an option called bridging loans is available, there is no need to leave property deals that you so much looked forward to.
