A couple of years ago my wife and I were in the process of
selling our house. We were pretty sure we had found a buyer and
had agreed on a price acceptable to both them, and us but they
wouldn't be able to buy our house for about three months. My
wife and I were totally ok with this since we weren't in any
particular hurry to move, we just wanted to move into a bigger
home outside of town, somewhere a bit more rural.
Well, one weekend while we were driving around the countryside
looking at houses, we saw the perfect farmhouse. It was exactly
what we were looking for. Not too far out of town, on a quiet
road, overlooking a little lake and surrounded by tall oak
trees. In short it was perfect.
We contacted the selling agent and found out that the price was
within our budget, but only just. We told him it would be three
months before we'd be able to buy it and this caused him to
pause. Apparently there was a lot of interest in that little
house and he couldn't justify delaying the sale for three
months. So we let it go.
Why a Bridging Loan?
We did find another beautiful house so the story has a happy
ending but is there anything we could have done to get that
first house? The answer, had we known it at the time, would have
been a bridging loan. Bridging loans are short-term loans
offered by commercial lenders to borrowers for a specific
purpose. They can range in time from two weeks, for a very short
loan, to up to three years for commercial bridging loans.
Homebuyers who have not yet sold their property and wish to buy
require these bridging loans.
The interest rates are probably higher than for your typical
mortgage but this is because of the added flexibility and
convenience you have from the lender. There will also be set up
fees involved. However, they may work out at significantly
cheaper than some of the alternatives such as renting
accommodation. There will also be many situations in which the
price will be well worth paying if it means getting your dream
You should always shop around before agreeing to a bridging
loan as rates and fees can vary significantly. You don't have to
get it from your mortgage provider although there may be
advantages to doing so.
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