The Opportunities In Bridging Loans

With the recent and pervading financial crisis, people have become aware of the problems confronting them. Although there are a few and sporadic exceptions, gone are the days when we see advertisements and feature shows which display the pomp and pageantry of the construction boom, where housing development was on a spiraling rise and buyers and investors turn up left and right.

Bridging Loans For Property Auctions

With the fast-paced world and seemingly uncertain times, the trend these days are more on property auctions, where properties are managed and sold more expeditiously to urgent buyers, and this is where bridging loans become utterly useful for potential buyers. These loans are easily adaptable and flexible for these emergency financial requirements.

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There are certain opportunities in getting bargains and good buys of developed properties when it comes to property auctions. These auctions usually have the objective of disposing properties in faster times with limited durations and therefore prices become secondary.

The prospective buyer gets a golden opportunity in getting the property for auction he desires with the help of a bridging loan. This loan would serve as a stop-gap solution, giving the buyer the time needed to acquire the property he wants while waiting for long-term funding, and in order to make both ends meet should there be funding shortfalls in the bidding price.

Other Loan Purposes

The bridging loan has of course other uses than in participating in property auctions. It can be a quick solution to re-mortgaging of properties when the conventional property purchasing processes do not materialize or work out. This loan is flexible primarily because of the relatively swift time it is approved and granted.

When a developer, for instance, wants to finish a lot of properties for development and building, and he agrees on selling such properties at nominal discounts just to finish the project quickly, the developer can easily access bridging finance to get opportunities for quick property turnaround and better profits.

Types Of Bridging Loans

For a better understanding, it is worthy to note that there are basically two types of bridging loan, namely the open bridge and the closed bridge. When a prospective buyer has identified a desired property to purchase but has not yet in turn put up his existing property for sale, or has placed it on the selling block but has not yet been actually sold, he can turn to the open bridge type of loan. The lender usually will require a big amount of equity from the borrower in order to avail of this type of loan, including the submission of different ancillary financial documents and certifications, and the lender would nominally put a one year cap on the open bridge loan.

The closed bridge loan meanwhile is the more common loan package. When the borrower has already completed the sale of his existing property, this type of loan can be made available. This type of loan considerably has lower risks involved which is why lenders are obliged to offer this type to potential borrowers.

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