Investing in real estate is a great way of earning passive income. However, getting financing for your project can be daunting. Although there are diverse types of property development loans, all come with restrictions. However, bridging loans are gaining popularity among many. You can easily get them at Tiger Financial; they are great short-term financing solutions for real estate investments.
What are the distinct types of bridging financing?
There are two types of bridging financing. The first type allows you to borrow enough to pay off your existing mortgage. The amount is also sufficient to settle the down payment for your new home. With this type of loan, you are expected to remit regular monthly mortgage payments. But, once the home is sold, you pay the accrued interest and the outstanding mortgage balance.
The other type is ideal for borrowers with more available income. In this case, the bridge loan will give you the money to pay for the new home’s down payment. However, you’ll continue to make mortgage payments for both houses. Once your old home gets a buyer, you pay the accrued interest and the principal amount.
How do property developers benefit from bridging financing?
- Shorter repayment period
Unlike mortgages that last many years to clear the loan, bridging takes just a few months. You can pay up in weeks to 12 months. You can as well plan to pay for a longer period. As long as you repay the loan amount within the specified time, it can be an ideal financing potion for your property investment needs.
- Less hectic processes
Bridging financing allows you to take advantage of real estate deals. You can use this type of funding to pay up for a property as you follow up on your mortgage. Lenders normally approve the loan faster, especially if requesting for a low amount of money. The process is less tedious, and you will get the loan amount within two weeks. It can’t compare to a mortgage that can take months.
3. Benefits borrowers with poor credit scores
People with bad credit can access a bridging loan. With this type of financing, lenders are mostly concerned about how and when to repay the loan. These loans are secured against collateral, usually a property or a home. If you meet the conditions, your credit history and the usual lending criteria don’t matter much. Moreover, you improve your credit score by repaying the loan on time.
- Un-limited applications
Most lenders consider the intended purpose of the loan before authorizing loan application. But, this isn’t the case with bridging financing. You can use a bridging loan for different purposes without restrictions. The most important thing is proof of payment; the justification isn’t important.
- No early payment fees
With bridging financing, you can make payments early without incurring penalties. Unlike mortgages, if the repayment time is up to 12 months, you an up in four months, without being charged extra fees. With early payments, you also save on the interest amount.
- Bridging loans are great options for auction purchases.
A bridging loan is a quick source of financing, especially in auctions. With this type of funding, you quickly access the money, making it easier to purchase a property on offer. Most property sellers prefer cash or a buyer who can make a quick payment. With other types of property financing, this may not be possible.
The bottom line
When seeking property development financing, it’s advisable to engage an expert finance broker. They will give you information on the application process and can connect you to the right lender. They will also help you decide the best available types of loans for your needs.