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How Does A Bridging Loan Work? | Jabar Post Indonesia
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient (i.e. the borrower) incurs a debt, and is usually liable to pay interest on that debt until it is repaid, and also to repay the principal amount borrowed.
The document evidencing the debt, e.g. a promissory note, will normally specify, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower.
The interest provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.
Acting as a provider of loans is one of the main activities of financial institutions such as banks and credit card companies. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.
Top 10 Finance are the experts when it comes to Bridging Loans. Contact us on 0800 138 6001, or visit https://www.loans-co.uk/ and fill out our quick and easy enquiry form.
What is a bridging loan? In most cases, bridging loans bridge a temporary financial gap between payment required on a new property and the future sale of an existing property. However, the speed and convenience of this form of lending means that more and more asset-rich individuals are using this type of finance to turn a profit on property.
Bridging loans are…
• Known as a non-standard loan
Who are they for?
• Normally for homeowners
• Sometimes for developers and landlords
What are they for?
• Buying a new property while awaiting the sale of an existing one
• Stop a property from getting repossessed
• Buy, renovate and resell at a profit
There are various benefits and things to think about when considering Bridging Loans:
✓ Can ’unblock’ a property chain
✓ Secure a property via auction
✓ Are available from a wide variety of lenders
✓Are simple to apply
✓ Are relatively quick to process
✓ Effectively make you a cash buyer – handing you negotiating power
But these advantages must be balanced with consideration to…
? The higher cost of borrowing versus long term mortgages
? An exit strategy (e.g. how the loan will be repaid)
Here’s an example of how a Bridging Loan works:
Meet Harry, the homeowner.
£400,000 – Value of his current house, with a £200,000 existing mortgage
£600,000 – Purchase price of Harry’s dream home, where the vendor wants contracts exchanged within 28 days, completion within 6 weeks
Harry needs £600,000 + stamp duty and fees.
But his income doesn’t make him eligible for £800,000 of borrowing
1. A bridging loan provides the full £600,000
2. Harry buys the property, and sells his old home 3 months later
3. Harry’s existing £200,000 mortgage is repaid
4. The remaining £200,000 acts as a deposit for the new £600,000 mortgage
5. When these mortgage funds are received, the bridging loan is repaid
Simple, fast, and Harry now has the home of his dreams.
Ready to fund your next dream home, renovation or project? Let’s get started…
Simply fill out the quick and easy enquiry form on our website – https://www.loans-co.uk/
Top 10 Finance Ltd – The best deals. The lowest rates. The top UK lenders.
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