Obtaining financing can be difficult at times, especially when there's two properties involved. Whether it's residential or commercial, if the existing property is still on the market, it makes it difficult to obtain conventional financing when you're ready right then to move on a new property quickly. Don't lose hope, you can still find what is called bridging loans to finance your new deal. These loans are fairly flexible and funds can even be accessed quickly. Along with that flexibility, it is costlier and has shorter terms. When selecting who to work with, keep in mind you have a significant amount of money in this transaction, so it's wise to be very selective. Here the steps below are shown for obtaining bridging loans are outlined:
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1. Determine what your loan amount is and what length of time you will need.
2. Find and compare bridging finance lenders. It is recommended to work with a lender who specializes in these. They will be able to give a good selection of lenders. It's recommended to first go with a referral from a trusted source. That is usually the best way to find a reliable one. Here are a few items to consider when comparing:
• Loan volume (how many they do yearly)
• Subjective issues like reliability, dependability, and professionalism
• Experience
3. Talk with a few clients who've worked with them in the past. Check to see if the product they were offered was the actual one the received. Also look to see if the costs were what they expected. And very importantly, inquire how the closing went and if it went smoothly. Understanding their entire experience will better help you to know what to expect.
4. Once you've made your selection, decide the following:
• Bridging loan amount needed (depends on your credit, you may not get the full amount)
• Collateral to be used (this is usually either the old property or new one or both)
• How soon will you need the funds for your purchase
5. Determine the details of the bridging loan you are applying for. You will be able to review several choices when it comes to the following such as:
• Loan to value ratio (this is lower than conventional as it is a riskier deal)
• Interest rate
• Length of term (usually 12 months, but you may find other terms)
• Points
6. Fill out an application. You'll also need to have the following:
• Extensive details on your exit strategy (this is very important as they will look at this information as to whether they'll be able to receive the full amount when it is due)
• Payment for fees associated with the funding
7. Once you've completed, you'll just need to wait for approval which can be as quick as within 24 hours. Funds can be made available 1 week up to 3-4 weeks.
Bridging finance is a great way to fund a deal that may not be done with traditional ways. It is very risky and should be carefully considered. But if you're prepared, you can make it work for your situation.
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