Bridge loans are known in a variety of other ways – interim financing, gap financing, swing loans, or bridge financing. As the name implies, bridge loans are short-term financing loans used by an individual or a company until long-term or more permanent financing is secured.
Bridge loans are used as temporary financing when one is needed but not immediately available or accessible. A bridge loan is short-term and is often only for a year. Lenders and creditors are able to customize bridge loans to fit various situations, but they are most often used in real estate.
Because it is a short-term loan, the interest rate and origination fees are higher. Approval is much easier, depending on the situation, and access to the funds is much faster and convenient compared to traditional loans and most bridge loans do not have repayment penalties, making it a quick choice for individuals or companies needing immediate funding.
Bridge loans often require large collateral, and some people, take on this loan in order to purchase a piece of property, and separate property is used as collateral. For example, a young family wants to purchase a new home. They take on a bridge loan and use their current house’s equity as collateral as they work on the process of selling the current home. Once the sale goes through, the family then pays off the bridge loan.
Businesses also use bridge loans in certain situations. A company that is under equity financing may opt for bridge loans to pay off salaries and other expenses in the coming months until the next wave of funding comes through for them. Bridge loans are often used by businesses to tide them over until funding arrives in order to stay afloat.
Lenders most often prefer a closed bridging loan, wherein the loan is within a specific time frame agreed upon by both lender and borrower. This offers a lower interest rate since the repayment period is already predetermined. An open bridging loan has no predetermined repayment date and is preferred by borrowers who are unsure when they can receive long-term funding.
Another kind of bridge loan is the first charge, where the lender receives the first charge in the property in the event of default before all other lenders get a share of the amount. A lender may also be the second charge when a borrower has taken a first charge bridge loan with another creditor.
Blake Mortgage offers bridge mortgage loans in Phoenix and surrounding areas. If you are looking to sell your current property and move to a new one, Blake Mortgage’s bridge loans can help you with the transition and eliminate the stress and frustration of worrying about funding for the down payment
For bridge mortgage loans around Phoenix, Blake Mortgage is your top choice. Most lenders do not require strict application criteria and would be upon their judgment to grant the loan. With Blake Mortgage, you can get an expert to discuss with you your bridge loan options with more flexible repayment terms. Reach out to Blake Mortgage and get expert advice on your financing options.