In the event that an immediate need comes rearing its head, we’re lucky to have something called bridging finance. But what is it and what benefits does it bring? If you’re new to it, we urge you to read on. This financing medium beloved by the real estate world might just be the lifesaver you’ve been looking for.
A term given to a stop gap measure known for bridging the fund gap brought about by timing obstacles, bridging finance is a short term loan taken out to provide for the immediate short term liquidity needs for asset acquisition transactions. Its popularity and widespread use is due to its number of benefits and below are some of them.
Since time is of the essence in the world of real estate, one has to be fast otherwise someone else might grab the chance before you even get close to it. Since sellers will always require down payment and/or security deposits to be made, this can be challenging for those that have their funds pending. With this financing method, we can eliminate the opportunity losses.
Unlike other types of credit, the use of a bridge provides quite the flexibility. This is because borrowers have two repayment options to choose from and they can favor whichever one suits their needs and capabilities best. As the first option, one may choose to close the loan prior to its maturity or as early as one deems fit and is capable of doing so. The second is where one may opt to repay upon maturity which is oftentimes the day when one’s permanent financing is made available.
Designed to fulfill short term liquidity needs, bridging loans are temporary which makes them less burdensome as compared to other credit options in the market.
Some people choose to finance their acquisitions through credit such as in the form of a mortgage or a bank loan. Others on the other hand opt to sell the current asset they’re using and use those funds to buy a new one that suits their current needs. When that happens, they’ll have to evacuate the current space while waiting for a buyer thus the need to temporarily rent. This creates added cost. By using a bridging finance, buying the new place becomes possible even if the current one is still waiting for a buyer thereby cutting the need to spend on rent.
Bridging Finance Video
More on finance on this site:http://www.alternativebridging.co.uk/investors/