A new alternative to costly bridging loans

DATE: May, 5   COMMENTS: 0   AUTHOR: Allan Azarola

Building societies are offering one-year mortgages to help people who are unable to move because of the housing market slowdown. The deals are essentially bridging loans for those who have found new homes, but are unable to sell their existing property.

Well, these kinds of bridge loans can be expensive but homeowners would have to reluctantly opt for it unless they find an alternative. One such alternative could be by looking for real estate firms like Crawford Home Buyers (https://webuyhousesinatlanta.com/woodstock/) or ones like them that can buy houses in any condition and pay the appropriate amount to the homeowner. That way, people can easily move out of their existing homes even in an economic slowdown phase.

Bridge loans also often come with higher interest rates due to their short-term nature. So, when you’re between homes, you might be faced with the burden of managing two mortgage payments or paying rent along with your mortgage. But there are ways to avoid this. Many people know what quick move in homes are, but did you know that they can also be a viable solution to the bridging loan problem? This is because, potentially, they can allow you to swiftly transition without the financial strain of overlapping payments.

Similarly, choosing to work with a reputable realtor firm can also offer numerous advantages. First and foremost, homeowners can avoid the financial burden of bridge loans and any related high-interest rates. Selling directly to a professional buyer eliminates the need for complicated and costly loan arrangements, making the entire process smoother and more financially viable.

In an uncertain economic climate, selling a property quickly and efficiently becomes paramount for homeowners looking to move on to their next chapter. By choosing to work with a reputed realtor firm, such as this Providence Realtor, homeowners can navigate the real estate market with confidence and ease, making the transition to a new home a stress-free and financially prudent decision.

On the other hand, if you are an ardent real estate investor, it’s wise to explore options other than bridging loans to help you finance your investment. You can seek a rehab loan from firms such as Pine Financial Group to support your venture. Similarly, considering other forms of real estate financing, like traditional mortgages, hard money loans, or lines of credit, can offer you more tailored solutions to meet your specific investment needs and strategies.

Keep in mind, bridging finance is notoriously expensive but Enness Private Clients, the mortgage broker, calculates that it would be 18,000 cheaper to borrow 500,000 on one of these new mortgages than it would be to take out a typical bridging loan. The Shorter Term finance mortgage from Market Harborough building society has a rate of 5.49 per cent for up to a year, almost half the 9 per cent rate at which bridging loans start. You have to pay a fee of 2 per cent ( 6,000 minimum) and there are no early repayment charges. The minimum loan size is 200,000 and the maximum 1.5 million.

“It is great to see lenders evolving their products to suit market conditions,” says Chris Lloyd, associate director at Enness. “This product has been very popular with our older clients highlighting its importance in the downsizing market.”

Harpenden is another lender that is arranging rapid loans for Generation Stuck: an Enness client needed to find 687,500 after the sale of their 1.2 million home fell through and they wanted to complete on a new-build within a tight deadline. The building society agreed a rate of 6.19 per cent and an arrangement fee of 2 per cent.

The rates for bridging loans typically start at 0.75 per cent a month, which works out as 9 per cent a year, according to Stephen Wasserman, the managing director of West One Loans, a specialist bridging finance lender. Typical arrangement fees are 1 per cent.

He says this type of finance is sought by people who are “stuck in a chain and it’s taking longer than they would like to sell their existing homes,” or small business owners who need to release money for their business quickly. The majority of his clients are property investors.

The other option for short-term finance, suitable for people who don’t need to borrow so much, is a personal loan. These are becoming increasingly generous and rates have gone down. First Direct launched loans of up to 50,000 at 6.7 per cent last year (most personal loans are capped at 30,000). This is almost double the 3.4 per cent it charges for loans below 30,000. Someone borrowing 50,000 over the maximum seven-year term would repay 743.45 a month – a total of 62,449.

It's only fair to share...Share on facebook
Share on google
Share on twitter
Share on linkedin