Pros and Cons of Taking Bridging Finance Loans

When you want to purchase a new home after selling your current home to meet the growing needs of your family, it’s always a good idea to close the deal first on your current home and use the profit to purchase your new home. It protects you from any financial burden in the near future. But things don’t always work in your favour. What if you get a very good deal on a property you are looking to purchase before finalizing the sale of your current home? You will be out of cash to close the deal on your new home. It is where a bridging finance loan can help you with proper transition between two projects without facing any cash flow gap.

Bridging finance loans in NZ provide a great financing solution to people who want to purchase a new home while their current property is being sold and the deal is not finalized yet. These are the short-term loans to bridge cash flow gap between the need to spend money and the time when you will receive the money after selling your current home. For example, if you sold your current property with a settlement date in 60 days and in the mean time you purchase a new property with a settlement date in 30 days, it means you will need a loan for a period of 30 days to finance your purchase. Bridging finance loans in NZ can fulfil this need at a competitive interest rate and loan term.

There are number of factors that could decide whether or not a bridging loan is the right option for your needs:

•    Can you afford a bridging finance loan?
•    Do you have an exit strategy and repayment plan?
•    For how long you need the bridging finance? (It depends on your sale and purchase agreement)
•    Are your certain that you can sale your home in a certain period? 

These factors make bridging finance loans a tricky choice for many people who are nit clear about their sale and purchase situation. It is why you need to look at the pros and cons of getting a bridging finance loan before making your final decision.

Quick and hassle-free finance as the loan application can be completed within two weeks. It is an ideal option when you need a fund quickly.

With no monthly repayments, bridging finance loans are very useful to raise capital.

•    Applications are usually completed in under 14 days, making them ideal when funds are needed quickly.

•    As there are often no monthly repayments to make, bridging finance can be used to raise capital where cash flow is tight, but you have the assets to comfortably repay the loan.

•    The bridging market is very competitive, and this is leading to a reduction in interest rates. With rates starting from as little as 0.37% per month, bridging finance has never been cheaper.

•    Where properties are being purchased under value, lending can often be based on the full value of the property, meaning it’s possible to purchase a property without a deposit.

•    Bridging loans can be used to purchase properties that would be ineligible for borrowing using other types of borrowing, such as property that is not habitable.