If considering purchasing an investment property, it might be wise to investigate the pros and cons of a bridge loan, which allows using the buying power of the current property to fund the second. Bridge loans are a useful real estate financing tool for temporary short-term use. These loans allow the property owner to borrow and secure funds against their existing real estate property.
Once these funds are used to secure the new house, one can sell off the previous house and repay the bridge loan with the help of money lenders in NY.
So when applying for a bridge loan, analyze whether it’s the best option for anyone making a new investment.
For this purpose, let’s weigh the pros and cons of bridge loans.
This is the most significant benefit of taking a bridge loan. It allows the freedom to buy a house through the help of bridge loan lenders New York without having to wait for a previous property to get sold.
Bridge loans essentially bridge the gap between the sale of the current real estate property and purchase of a new property.
"With a bridge loan, you can buy a house without waiting for your previous property to sell."
When it comes to real estate, having the funds at the right time can make or break a deal. Commercial bridge financing is highly competitive. As a borrower, one can arrange and access funds in a swift and smooth manner. The speed at which the funds are made available by the lender makes a big hit with second home buyers.
Another advantage of bridge loans is that it's a short term loan. Although they range from six months to several years, it is the short lifespan of the bridge loan that attracts borrowers.
A bridge lender New York will recommend that unlike conventional loans, one can pay off this loan in a shorter period. Timely repayment reduces the chances of the borrower facing any financial setback with penalties and late fees.
As a borrower makes monthly repayments, the bridge loan is easier on companies that have a tight cash flow situation.
This reduces the financial stress on the borrower, thus making the loan more affordable.
"A bridge loan is easier on companies that have a tight cash flow situation."
While traditional mortgages are usually available only for habitable properties, bridge loans are available for a wide range of purposes depending on various needs. A bridge loan can be sought for both residential and commercial properties. Whether one needs to buy land, refurbish an older property, fix and flip, or even for construction project, bridge loans are a great option.
Most traditional lenders will only entertain borrowers with a good credit score. Many people fail to qualify for the traditional mortgage because they don’t meet the eligibility criteria of banks. Bridge loan financing considers the value of the current property and the profitability from the development project. Thus depending on the situation this financing is also available to those people with poor or no credit.
Most loans have hefty exit fees for early loan repayment. However, there are no such exit fees associated with bridge loans. This makes it especially more preferable for short term financing by hard money lenders NY.
There are various fees associated with bridge loans, like origination fees, broker fees, valuation fees, legal fees, and more.
Furthermore, since there is higher risk involved, bridge loans usually have high-interest rates, from 8 percent up to 11 percent of the loan. Work out the terms with the bridge loan lenders New York before applying for the loan.
"Bridge loans have high-interest rates, from 8 percent up to 11 percent of the loan."
Taking any loan will increase the total debt and sometimes, the buyer has two mortgage payments; one for the previous property and other for the new house. This increases ones financial obligations and may put a strain on the overall budget.
When taking out a loan from a bridge lender New York, there is high risk involved when one is unsure whether the existing property will sell on time. In addition, there is uncertainty regarding the value one will get for the house.
Before taking on a bridge loan, it is important to carefully assess the market conditions and weigh all the options. For any doubts, speak to a credible financial advisor. It is only advisable to take account of the pros and cons of bridge loans and when the odds are in favor, go for it!
If you have questions about the pros and cons of bridge loans, speak to the hard money lending experts at Gauntlet Funding. We offer competitive rates with any prepayment warranties for prime borrowers. Contact Gauntlet Funding today at (631) 465-2161.
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