A bridge loan is a type of credit normally requested when immediate financing is needed.
It consists of short-term financing, which is produced during the processing of two loans of longer duration and more economic amount. Hence the name "bridge" defines this type of loan.
Zip Funding is providing the best short term bridging loans and finance at the lowest interest rates in Australia.
The bridge loan is requested on most occasions in the process of buying and selling a home.
Whether it is to face an important payment in the processor to have enough time to sell the main home, under fair economic conditions, the bridge loan offers the necessary financing.
This means that on many occasions it is also identified as a "bridging loan" since it is in practice a kind of mortgage loan, which is granted for operations that allow applying for a traditional and longer-term mortgage loan.
One of the key differences of the bridge loan compared to a traditional personal loan or a normal home loan is its temporary nature. Normally it is 2 to 5 years, obviously being able to face the payment in advance, when the objective is achieved, which is usually to sell the original property.
In addition, this bridging loan is also characterized by the immediacy of the payment, since it is precisely designed for when money is needed quickly, given the need to face an essential amount, with which to continue with the mortgage process.
At the same time, stricter concession requirements must also be met, since the risk for the financial institution is greater when accepting these credits.
Among the most notable advantages of the bridge loan, is the flexibility in the payment. For example, it is possible to negotiate that it is paid with a lack of capital, that is, that only interest is paid without the need to amortize the capital.
It is also possible to combine the conditions of the bridging loan with others of the consequent mortgage loan. This offers lower risk to the financial institution due to the long-term commitment and better conditions for the applicant, as they have to face lower payments, for example, until they can sell their home.
The bridge loan also serves to avoid having to face a demanding mortgage loan, which leads to critical economic situations.
If the home is sold, some owners can pay off both the bridge loan and the long-term mortgage loan, reducing or even eliminating all their debts.
However, the main disadvantage of a bridge loan is in the real estate market itself. If the house cannot be sold at the expiration of the 5-year term, the full amount must be returned plus any remaining interest.
Or it will become a normal mortgage loan, without deficiency, which can be an excessive cost to face monthly.
