What are the Pros and Cons of bridging finance?

Normally, those people apply for the bridging finance if they are running up a business of real estate or the one who is in must need to buy a house of own. In such cases, the buyer needs lots of hard cash and this loan can help them to get this.

It is also a well known fact that you will not be able to find many lenders who will offer you this loan because this loan involves lots of risk with it. But, if you have been able to find the one who can offer this loan then make sure you get it in short duration of time before it gets too late for you. Due to high risk, the interest rates associated with this loan are also high, so you have to consider that option as well. So, look for all these options and then start with your proceedings.

If you apply for the Bridging finance then you will have the liberty to buy a new property before you are done with the selling of an existing property and perhaps this is the most important advantage of this. If you have not completed with the selling of the property which you have and you have planned to buy a new property then this can be really stressful for you if you do not have an adequate bridging loan with you. The financial help which you will be getting from bridging finance will be referred as the temporary loan which you can utilize for the purchase of your new home.

Hence, the Bridging Loan [http://www.mybridgingfinance.co.uk/about-us] will enable you to search for an accommodation in the rented area.There are various different advantages of using this finance and it will take less time to complete with the proceedings. But, make sure that you utilize it well otherwise there can be several cons of this loan as well. The lender might ask you to offer an equal share in your new property until and unless you are done with the repayment of loan. The selling of your existing property might take more time than you expected but for that time also you have to pay the rate of interest on the loan. In fact, it will keep on increasing until the sale of your property. As the name indicates, this loan can be applied for the short duration of time, so that the buyer does not find it hard to purchase a new property. The duration of this loan will vary between 6 to 12 months.

Also, there is high risk involved with this loan so the lender may ask for the higher rate of interest. So, the individual who has applied for this temporary loan has to prepare himself for the payment of high interest rates as well. As if now, there are not many lenders who will offer you this loan with ease, so it is better that you perform a thorough research first and then apply for it. Hence, it is preferred that if you will be able to buy the property within the desired time limit then only you should apply for this loan, otherwise the professionals will prefer you to avoid applying for this loan if you are doubtful.

Things You Need Know About Bridge Loans

This type of business financing is very aptly described by its name, Bridge loans or Bridging loans. This type loan is not a permanent or even long term loan. It is exactly as stated, a bridge between now and when the long term financing is in place. In general, bridge loans are taken out for a maximum of 3 years awaiting long-term or larger financing. The loan’s purpose is only to cover the interim period until the more permanent financing can be arranged. Once the new financing is obtained, the money will be used to pay back the bridge loan.

Bridge loans have a higher interest rate than conventional loans. It is not uncommon for lenders to require cross-collateralization in addition to designating a low loan-to-value ratio in order to lower their risk. However, bridge loans are able to be arranged quickly and do not require a massive stack of paperwork.

Bridge loans are frequently used in real estate purchases to quickly close on property, take advantage of a short-term opportunity, or retrieve an estate from foreclosure. When the property is sold or refinanced, the loan is typically paid back.

Bridge loans are similar to hard money loans as both are not traditional and obtained for unusual circumstances or emergencies. The major difference is that hard money refers to the source whether an individual, private company, or investment company. Bridge loan references the duration of the loan.

The interest rate of a bridge loan is generally 12-15% for a maximum of 3 years. For commercial properties, the Loan-to-Value ratio does not exceed 65% and 80% for residential properties. Loans can be issued on a closed or open timeframe for payoff.

Banks do not typically offer real estate bridge loans because of the high risk and lack of documentation which does not meet the industry’s lending criteria. A bank would have difficulties justifying its lending practice to government regulators and investors if it issued bridge loans. Therefore, most bridge loans are generated from individuals, businesses, and investment pools.

Bridge loans are used in corporate finance and venture capital as well. They can infuse small amounts of cash to carry a company through consecutive major private equity financings. In addition, they can assist a distressed company while search of an acquirer or larger investor. If a company is being sold, a bridge loan can finance final debt before it is publicly offered.

Lone Oak Fund is a private mortgage fund larger than many banks that makes bridge loans typically ranging from $500K to $12.5M on commercial and residential properties located throughout Southern and Northern California. Founded and managed by experienced real estate developers, Lone Oak Fund is the preferred lender for professionals seeking fast, reliable bridge financing for their clients, while providing an additional profit center.Since its inception in 2002, Lone Oak Fund has become one of the largest and fastest growing private bridge lenders in California. The fund is supported by the financial strength of its 400 plus members, including high-net-worth individuals, institutions, and pension funds, with over a billion dollars in loans funded.