Bridging Loan Basics -

Home
>
Mortgage Refinance
>
Bridging Loan Basics

Bridging Loan Basics

A Bridging Loan is a short-term loan 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 in such a way that the transactions occur simultaneously.

A Bridging Loan or "Bridging Finance" as it is also commonly known, makes such transactions possible. They keep the borrower from getting stuck in a rough financial corner, which typically means being forced to pay two mortgages at the same time. Bridging Loans can be used either for commercial or personal reasons.

Short term in nature, the application process for a Bridging Loan is similar to that of a standard loan. Most importantly, it's advisable to work with a lender that is experienced with this type of loan. Plus, as the need for a Bridging Loan often arises with little advance notice, being pre-approved for such a loan is a smart move.

Bridging Loans are usually interest only 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 need not be too concerned about default because the borrower is required to put up collateral to secure the loan. This is typically in the form of another piece of property. 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. Poor credit however need not be an obstacle.

The interest rate on a Bridging Loan is based on several key factors: the potential risk associated with the loan, the current interest rates and a premium added by the lender. As Bridging Loans are short-term, generally not longer than two years, and in most cases only a metter of months, the lender has only a short time to make a profit on the deal. The profit is derived from the interest rate.

Expect to pay a higher rate of interest for a Bridging Loan. And remember, the monthly payments are generally interest only. You should also expect to pay off the Bridging Loan in full, usually as a one time payment, as soon as the property is sold.

In the off chance that the property is not sold before the Bridging Loan matures, it can usually be converted to a conventional loan without a payment penalty. But as ever you should not assume this is the case and be sure to check with your lender that this is an option if circumstances call for it.

About the Author
Need a Bridging Loan Fast? Commercial Lifeline, Commercial Bridging Loan and Commercial Mortgage specialists can help.

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.

In The News:

Mortgage Refinancing Points to Consider
Corsavoo.com, France - 10 hours ago
Though it is probable to attain a no-cost refinance mortgage from a mortgage loan lender, remember that these lenders are out there, trying to earn a ...

Boston Globe
Washington's Fannie And Freddie Plan: Why Now?
Forbes, NY - 15 hours ago
Any announcement would come just weeks before the two companies have to refinance $225 billion of mostly short-term notes. Fannie and Freddie sell debt to ...
Video: Obama Calls for Changes in Mortgage Giants AssociatedPress
US government to take over Fannie Mae, Freddie Mac Monsters and Critics.com
Government bail-out for US mortgage giants FannyMae and FreddyMac domain-B
Nolan Chart LLC - HULIQ (press release)all 2,105 news articles

Understanding Mortgage Refinance Rates
SheKnows.com, AZ - Sep 4, 2008
Mortgage refinance rates are the lowest rates, homeowners can get when trying to refinance their mortgages. Simple, isn’t it? Maybe so, but obtaining the ...

San Diego Union Tribune
Troubles spread to prime Md. mortgages
Baltimore Sun, United States - 21 hours ago
... interest-only mortgage with an adjustable rate. The rate kept rising until it was just too much, and he was told he couldn't refinance because the value ...
Report says 3.1 percent of Conn. mortgages overdue Newsday
Home loan troubles break records again The Associated Press
US Mortgage Foreclosures, Delinquencies Reach Highs (Update3) Bloomberg
Washington Timesall 679 news articles

Houston Chronicle
Baytown woman sues lenders, says she was a victim of predatory ...
Houston Chronicle, United States - Sep 4, 2008
Nanette Lewis refinanced her mortgage to get peace of mind. Instead, she says, she got a bait-and-switch, predatory loan and heartbreak. Now far less naive, ...

Bargaining for a better loan
Sarasota Herald-Tribune, FL - Sep 5, 2008
The potential bargaining power of borrowers is greatest on a refinance, because typically they have no time limit on when the money is needed. ...

Foreclosures, Overdue Mortgages Increase Again
Wall Street Journal - Sep 5, 2008
Lower prices, in turn, make it much harder for borrowers to refinance if they fall behind on their payments. The drop in values also means people have less ...

Mortgage Refinance Options to Think About
3x24 - Your Newspaper and News Magazine, Germany - Aug 26, 2008
Very few people in the world can afford to purchase a home in one payment so the world of mortgages and mortgage payments ‘came to be’. Mortgage refinance ...

What’s A Divorce Got to Do with Your Mortgage Refinance?
Corsavoo.com, France - Aug 25, 2008
When you’re the aggrieved partner, you silently wish that things will suddenly take a better turn, especially with an unpaid mortgage. Refinance plans have ...

The Truth About Mortgage Refinancing
Contacto Magazine, CA - Aug 25, 2008
It seems like everyone is jumping on the mortgage refinancing bandwagon. Maybe you're thinking about it yourself? After all, with rates as low as they are, ...

mortgage refinance - Google News