When it comes to real estate financing solutions, there are lots of different varieties to choose between. These include fix and flip loans, new construction loans, and foreclosure loans. Another type of loan that is available to you if you are looking to buy a property is a bridge loan. In this post we take a look at bridge loans in more detail, including how they work and the pros and cons of taking one out, in order to help you figure out if they are the right option for your needs.
What Is A Bridge Loan?
Bridge loans are short term loans, most commonly used to buy houses, which enable you to access cash quickly for a short period of time while you are waiting for other funds to become available. For example, they can be used to bridge the gap if you want to buy a new house before your old one has sold, or to buy a property at auction before getting a mortgage in place for it. These types of loans generally last anywhere between a few weeks to a year, and need to be backed by some sort of high value asset such as land or a property.
What Are The Advantages Of Taking Out A Bridge Loan?
Bridge loans also usually have simple repayment terms and are often available even if you do not have a good credit score, meaning they are open to a wider variety of people (remember you will likely still need some form of equity and a definite means of repaying the loan). Finally, you can usually add the monthly interest payments to the balance of the loan, meaning that you do not have to make monthly repayments and can instead pay off everything altogether at the end of the loan’s term.
Are There Any Disadvantages To Bridge Loans?
As with any loan, you should always get professional advice before taking out a bridge loan. It is important to be aware of the full cost of repayment, including any interest and fees you might incur, before you sign any agreements. One factor to be aware of with bridge loans is that they are usually more expensive than a normal mortgage in terms of their interest rates. This is not necessarily a problem, especially if you only need the loan for a short period of time, but it is worth being aware of this fact so that you can make an informed decision.