Bridging Loans
Bridging Loan: Bridging loans or gap loans are loans used to bridge the gap between two transactions. Duh! Pretty simple, eh? Were it so. First of all, sellers would not be in a position to need bridging loans if everything they were planning had gone as they had wished. Second, bridging loans cost money, in the form of additional interest over and above that of a longer term loan and the balloon note of repayment sitting out there at the end of the loan.
Caution dictates that a seller should wait until his/her current home sells before buying another house. However, whether due to relocation, change in family or job-related circumstances, or simply a slowing market for home sales, people sometimes find themselves with two houses. These are typical situations where sellers will need bridging loans. Bridging loans enable a seller to borrow against the equity in his/her current home until it sells.
Bridging loans usually include a balloon note that has to be repaid at the end of loan period. This can be disastrous if the home used for equity does not sell or does not sell for as much as necessary. However, if that home sells fairly quickly or for the expected amount of money, the bridging loans can be rolled into the new home mortgages in order to satisfy the balloon repayments of the bridging loans.
Obviously, if the house you are selling has good contract on it to a seller who has a locked in mortgage from a solid mortgage company, then a bridging loan can be a lifesaver. However, with the failure of a number of so-called front-line mortgage companies, it is hard to justify the use of a bridging loan. In good times, people have used leverage to achieve great financial gains. Remember, however, leverage works both ways and so do bridging loans. In other words, instead of staving off the inevitable, bridging loans can accelerate it.
August 24, 2007
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When time is of the essence, access to quick and reliable bridging finance could make or break a deal, that is why at AG Capital, we put our best efforts in arranging your bridging loan within the quickest timescale.
We have access to unlimited funding, assuring competitive levels of capital per deal. Our funders are always interested in deals that make good business sense even if it does not fit within our usual lending criteria.
check our website for more info http://agcapital.co.uk/
Posted by: AG Capital | June 21, 2011 at 12:33 PM