A bridge loan mortgage is a short term loan that a potential home vendee can apply for in the event that he lacks adequate money to purchase a new home, while awaiting the sale of his current home. This means that the buyer will temporarily enjoy the ownership of both homes before the old one is sold. The old home will serve as collateral and will contribute largely in the repayment of the loan for the new home. If you are thinking about taking a bridge loan mortgage, here are facts you will consider knowing:
The repayment period
The duration taken to repay such kind of a loan is usually shorter than the conventional time allowed by bank loans. Usually this period averages between six months and a maximum of three years, reason being that the loan is just a bridge to cross you over to a point in time. The lender sweetens the deal by minimizing the troubles of a prolonged loan application process or disbursement time but will as well limit the demand time.
The interest fees
It’s generally accepted that the interest rates for this kind of loan will be higher than the mainstream bank loans. The lenders normally allow a more flexible repayment pattern in terms of installments but the interest rates remain inflated. However, this barely discourages serious buyers considering how fast their desires are met by the loan. Furthermore, the old home when sold will cover a great part of the loan so that the eventual amount will not seem large.
The exit strategy
Having an established way of settling the loan gives one confidence of approaching the lender. Most lenders will demand to see your intended ways of covering the loan before they lend you. More often than not they will emphasize on scrutinizing your credit worthiness or collateral security. A previous history of a successful timely loan repayment is an advantage because it actually boosts your credibility. On the same line, having a back-up plan such as another asset that you can sell to settle the loan is of equal importance. Bridge loan mortgage have no pre-payment penalties unlike other hard loans.
Approach to the lender
Private lenders require objective persuasion to lend by proving your loan worthiness. Therefore the approach you make will play a part in your chances of acquiring the loan. You will find it valuable to present yourself with a language that portrays commitment, confidence and professionalism. Abiding by the first hand rules that are set will put you at a better position also. Other demands should be made later.