A bridge loan as the name suggests helps you bridge a gap when you urgently need finances until you can get your hands on a more sizable amount of financing. It is a short term loan that helps you tide over a business or property purchase until you are in apposition to secure a larger long-term loan. Many people use these loans to get access to real estate that is being sold off quickly or to prevent foreclosure. These loans are normally offered for terms of between twelve to thirty-six months and they can also be refinanced into low -cost, long term through a lender.
This type of loan is not only used for short term purposes but is normally needed quickly which gives the borrower an opportunity to look for a longer term loan when they are ready. Bridge loans usually have a higher interest rate of between twelve to fifteen percent due to the short term duration. If you are looking to finance a new development project, then you can use this type of loan for site acquisition and development expenses.
There are other uses of a bridge loan for developers as it enables the construction to commence before they can get a chance to secure a construction loan. You can also use these loans when looking to buy a home. It is essentially helpful especially when you are unable to come up with the necessary amount for a down payment on a new home.
This could happen if for example the amount of money you are relying on in from the sale of your existing home does not come through on time to purchase the new one. You could access a bridge loan by borrowing against the equity of your existing home. The larger your home equity, the more access you have to a larger amount. You can then repay the loan once your existing home is sold.
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