There are times that life calls for a change of lifestyle or relocation from one city to another for many reasons. At such a time, one may buy a new property and sell the old one in anticipation of moving to the new home. It is during such a time that one will need to finance the housing cost and be able to move in. A bridging loan comes in handy to support this transition; it will be paramount to know how it works.
One of the most important aspects is knowing how to calculate a bridging loan so that you can know how much money you expect to get, the interest, and the period. This guide will educate us on how to go all about this and make good plans at the onset.
What is a Bridging Loan?
A bridging loan is a short-term financial solution for people seeking additional funds to buy a new house while selling the old property. It gives one the liberty to move into the new home as they finalize the sale of the old one. Since the loan is short-term, it is paramount to check one’s ability to pay it off within the required time to avoid repossession.
How does a Bridging Loan Help?
First, a bridging loan helps meet the current short-term obligations as it fills the gap between when the old property will be sold and the time of paying for the new house.
The advance money can also be used to pay for the moving costs and show that both houses are in good condition before occupancy.
However, the loan needs to be backed up by security, and lenders such as banks or licensed moneylenders will ask such questions before the onset of the loan application. This is because they will use the Title deed as a security for the loan advance.
Additionally, it is a great avenue to seek advance because of the fast processing time by licensed moneylenders. Tradition credit is one of the established moneylenders that have offered bridging loans for decades, and it is worth working with us for convenience and transparency. Be assured that you will get your loan in as little as 12 hours upon approval. Additionally, because this loan is secured, not much information will be required, and the period will be shortened.
Factors to Consider When Taking a Bridging Loan
As you plan to take a bridging loan, there are several considerations that you ought to keep in mind.
- The Overall Cost of the Loan
It is vital to know the total cost associated with a bridging loan. This includes the processing fee, interest rates and any other charges the Lender may have. By comparing these costs, one can make an informed decision on whether it is worth taking it.
- Loan Period
As you plan to take a bridging loan, confirm that the agreed period will allow you to consolidate the funds and pay in good time.
- Confirm the State of the Real Estate market
As you plan to sign for the bridging loan, confirm that the market price is within the range of the market such that the property will not be undervalued.
- Repayment
It is important to ensure that the monthly repayment amounts allocated are within your ability to repay even when the sale takes longer than anticipated.
How to Apply for a Bridging Loan
The loan application process for this loan is simple. First, you need to submit the documents requested by the Lender, such as the bank statements, any outstandingloan, a copy of the title deed, and any option to purchase.
You also need to confirm your residence by providing the NRIC or a Passport, and in the event that you are a foreigner, work permit authorization letter must also be provided.
The reason as to why the Lender asks for the documents is to confirm that the borrower has the ability to pay back the loan within the agreed period.
Credit scores will also be checked to confirm that you have discipline when it comes to loan repayments and that if you advance the loan, you will pay in good time.
How to Calculate a Bridging Loan
If you want to get the actual loan cost, use the online bridging loan calculator. It will give you the actual cost of the net amount you will receive, the costs you will pay, the tenure, monthly repayment, and the gross loan amount.
The calculator is essential as it will give you an overview of what you expect to get once you make the loan application.
Here is an illustration of how to calculate a bridging loan;
Mr. B is financing a property purchase worth $400,000, with the proceeds payable in six months
The cash Down payment will be 5% of $400,000 = $20,000
Cash or CPF Down Payment will Be 20% of $400,000 =$80,000
The loan amount will be LTV of 75% =$300,000
The total amount =$400,000
Bridging Loan Options
As you seek to apply with the right lender, you need to check if any viable options could offer you the solution. Some sources will be Banks, credit unions, andlicensed moneylenders.
As you seek to compare these options, confirm a number of considerations, such as;
- The Interest rate
- Whether the bridging loan will be applicable for all types of property purchase
- Check the loan term.
- The Principal amount is payable in full after the loan period. Calculate this using an online bridging loan calculator for accuracy.
You Can get a Loan from The Right Lender
With this information, you are ready to get a loan, but it is paramount to work with the right Lender. At Tradition Credit, you will access an easy and quick loan. We are a trusted licensed moneylender in Singapore with a team of experienced loan professionals. You cannot get wrong working with us.
Contact us today for your loan and a loan officer will get back to you with a quote in minutes.