In a nutshell, bridge financing is a way to unlock the equity in your current property while it is still on the market. You could be an individual who is looking to move up the property ladder quickly, or even a commercial enterprise who want to expand into new premises.
Before we move on, it’s worth noting that bridge financing is not all peaches and cream. It can be very risky if you don’t know what you’re doing, and could even lead you right into bankruptcy. In other words, tread very carefully.
Below we have compiled 5 essential bridge financing tips and tricks.
See if you qualify
The first step in securing bridge financing is to see if you qualify, and the only way to do this is by talking to a few lenders so they can take a closer look at your situation. If you do qualify, great! If not, then there must be a good reason, which means you should probably forget about bridge financing altogether and seek out other alternatives.
Find the right lender
Once you are qualified for bridge financing, then it’s very important that you pull on the reins and take a step back. Don’t just go with the first lender that gives you an offer, as this could result in you overpaying big time. There are many lenders out there, so you should be prepared to shop around to find the best rates and terms. Quite simply, do your homework and you won’t get ripped off.
Never borrow more than you need
If you apply for $100,000 and the lender offers you $150,000…should you take it? The answer is no. Why? Because over-extending yourself financially is always a slippery slope that typically ends in despair. Work out your figures, stick to a number, and then don’t accept a penny more. If you follow this simple rule then bridge financing will not be a problem for you.
Check the small print
Let’s face it, the main goal of a bridge financing company is to make money, and sometimes they do this by burying details of fees and extra charges in the small print. This is why you should always check the small print before signing a contract, and if there is anything you don’t understand seek further clarification.
Pay back the money quickly
Understand that bridge financing is meant to “bridge” the gap in your finances. It is for short term use only, which means you should pay back the money quickly to avoid any problems. If there is doubt in your mind about whether this is possible, then don’t get the financing in the first place.