Bridging Finance

In order to purchase a home or commercial property, the potential buyer generally gets pre-approved for a mortgage loan before shopping for and finding a property. That way the buyer knows exactly how much he or she can afford to spend on the property and the financing is already arranged before the deal is made.

There are instances, however, in which financing cannot be arranged before the closing on the home or commercial property. There may be special circumstances in which the money for the mortgage loan is not available until several months after the closing of the loan. In these cases bridging finance may be available to provide the funding needed until the mortgage loan funds are available.

Bridging finance is a short term loan. The length of a bridge finance deal is generally one month to six months. The interest rate and terms will also vary within the bridge loan community, so it definitely pays to shop around. The interest rates on bridging finance loans will generally be higher than residential or commercial mortgage loans due to the short term nature of the loan and the specialty financing it represents.

While the interest rates on bridging finance loans are generally higher than normal mortgage loans, bride loans can provide an important service for buyers of residential or commercial properties. Providing a bridge between the time the home is closed on and the time the mortgage loan money is available can make the difference between getting the home your need and seeing it slip through your fingers, taking your earnest money along with it.

If you are buying a residential or commercial property and you think you may need bridge financing, it is important to talk to the seller or the property and the real estate agent as early in the process as possible. Doing so will help the entire transaction go more smoothly.

And finally, if you are considering bridge financing, be sure to shop around at several different lenders for the best deal. As with any other form of financing, the interest rates and terms on bridge loans will vary greatly.