Bridge loans can be the best financing option for you if you want to buy a new home before you have sold your existing one. You may come across your dream home all of a sudden and decide to purchase it with the money that you would obtain by selling your existing home. However, there can be a time gap between purchasing your new home and selling your existing home. Bridge loans, as the name suggests, serves the purpose of bridging this time gap, thereby helping home buyers to make payments for the mortgage on the new house in case the existing one has not yet been sold. This loan keeps the buyer’s existing home as collateral. The resources obtained from the loan are used to make the down payment for the new home.
It is not always possible to depend completely on the sales price of your existing home to buy a new home. While you cannot sell your current house and stay prepared with money before you, have found a new one, it is also not possible to sell off the existing house as soon as you find a new one. Hence it is essential to have an intermediary financing option to make down payments for your new home until the existing one is sold.
Apart from purchasing a new house, bridge loans can be used as a provisional loan option for various purposes:
�During times when a construction project is waiting for a permit approval, the developer can avail a bridge loan to start the project until it receives permission and becomes eligible to obtain construction loans from conventional lending sources. Before it has received permit approval, conventional lenders may charge extremely high interest rates due to the lack of certainty for the project to happen at all. Once it obtains permit approval and construction loans can be acquired from conventional sources at lower interest rates, the SBA Bank Loans can be paid off with that money.
�Critical situations can arise in businesses due to various factors. For example, a situation may arise when one of the business partners wants to quit, while the other one wants to continue with the business. In such situations, bridge loans can help immensely in running the business smoothly, thereby preventing the chances for financial shortage. In these cases, bridge loans are secured on the basis of the value of the company premises.
Let us discuss some of the advantages of bridge loans:
�The biggest advantage is that these loans can be obtained extremely fast and hassle-free. They can be secured in as short a time period as 24 hours if you can present all the necessary documents.
�It is possible for borrowers to avail bridge loans even if they have a poor credit record.
�Borrowers do not need to pay for legal and arrangement fees to the lenders. Also, bridge loans do not charge redemption fees.
There are some disadvantages of bridge loans as well. Some of them are:
�Though bridge loans can be obtained easily, the interest rates are extremely high.
�Till the time the borrower can sell off his existing house, he has to bear the burden of the monthly interests.
