Bridging Finance: A Risky Affair

Normally, there comes a situation when organizing the sale of an existing property or a possession and co-ordinating the purchase of a new one becomes very difficult, resulting in undue tension and financial pressure. Here arises the need of Bridging Finance. Bridging Finance facilitates the completion of a purchase of a new possession or a property. Now, a bridging finance loan is a temporary home loan. It facilitates the purchaser to purchase a property refraining from the length of the exhaustive sales process. Bridging finance can be used so as to refrain from relocating to rental accommodation. It gives the benefit of directly going to the new property. The process has multiple roles to play with the benefit of eliminating lengthy process. A person can use it to fund the finances for the purpose of auction, home renovation and refurbishment, first and second mortgages, debt consolidation and even new-build development and construction. There are a lot of bridge finance providers who even offer the option to defer the fee or the payment to be made till the completion of the sale. It will then be added to new mortgage. This is the best possible way to keep the costs down.

However, in any case, a person or the common man must have complete know-how of the concept and the procedure before moving ahead. The mot important thing to be considered in case of Bridging Finance is that there must be ample equity in the existing/current property. This is required to assist the purchase of both the properties- new one as well as the existing one. To add to, it must also be noted that until and unless the existent property or the possession is sold, the interest payments will keep on piling or adding up, and this can result in troubles the property is not quickly sold off.

Yet another problem with Bridging Finance is that taking out such a home loan will force the person to sell the existent property or the possession at a price much lower than desired because of affordability. Interest will be charged on the entire amount of the fresh loan. On a typical note, such a loan is meant for short term. As the word suggests, it is designed to bridge the gap between the purchase and sale, generally between the time periods of six to twelve months. Certainly, you will have to pay less cost if the term of the loan is less. A lender observes this loan as a bit riskier. The most important thing is that the property against which this typical loan is taken must be worthwhile.