Bridge Loans With Wholesale Kansas City
If you’ve heard of the term bridge loan but have no idea what it refers to, Wholesale Kansas City is here to provide you with clarity. A bridge loan is a type of short-term loan used to “bridge the gap” between the purchase of a new property and the sale of an existing property. There are several types of bridge loans, and they vary from traditional loans.
Understanding Bridge Loans
Bridge loans can provide the necessary funding for purchasing a new home when you do not have the funds readily available to you. They are often used to cover closing costs. To obtain a bridge loan, you can apply with a lender.
The standard amount that can be borrowed through a bridge loan is typically up to 80% of the combined value of your current home and the new home you wish to purchase. However, terms may vary depending on the lender.
Bridge Loans vs. Traditional Loans
Bridging loans offer a more rapid application, approval, and funding process than traditional loans, as they are used in time-sensitive matters. Although these loans are ideal for securing funding in a pinch, they are not long-term loans, and they tend to come with higher interest rates and fees than traditional loans.
Closed Bridging Loan
A closed bridge loan offers a set timeframe for repayment that is determined before the loan is finalized. This type of loan is favorable for lenders, as it provides them with a clear understanding of when the loan will be repaid. Additionally, closed bridge loans often come with lower interest rates compared to open bridge loans, making it a more cost-effective option for borrowers looking to finance short-term needs.
Open Bridging Loan
An open bridge loan allows for a flexible repayment plan with no fixed payoff date. To safeguard their funds, many bridge loan companies will deduct the loan interest from the loan advance. This type of loan is ideal for borrowers who are uncertain about when they will have the funds available to repay the loan. However, due to the lack of a defined repayment timeline, lenders tend to charge a higher interest rate on open bridging loans as compared to closed bridging loans.
First Charge Bridging Loan
A first-charge bridging loan provides the lender with priority over the property in the event of a default. This means that in the case of non-repayment, the lender of a first charge bridging loan will be the first to recover their funds before any other lenders that may be involved. This type of loan often comes with a better interest rate, as the risk level is lower.
Second Charge Bridging Loan
With a second charge bridge loan, the lender takes on a secondary position behind any first charge lender. These loans are generally used for shorter terms, and as such, they come with a higher risk of default. Due to this increased risk, the interest rates tend to be higher. The lender of a second-charge bridge loan will only begin to collect their funds after the first-charge lender has been fully repaid. However, the second-charge lender holds the same rights in regard to repossession as the first-charge lender.
The Advantages of Bridging Loans
Bridging loans offer several advantages, including:
- Speed: bridging loans can be approved and funded quickly, making them ideal for borrowers who must close on a property before they have sold their existing property.
- Flexibility: Bridging loans can be used for a variety of purposes and have flexible terms to accommodate your unique situation.
- No Early Repayment Penalty: Unlike traditional loans, bridging loans can be repaid as soon as the borrower has the funds.
Apply for Your Bridging Loan With Wholesale Kansas City
The experts at Wholesale Kansas City understand that purchasing a new property can be a complex and time-sensitive process. That’s why we offer a range of bridging loan solutions from reputable lenders to help our clients bridge the gap and obtain the funding they need to secure their next property venture. Contact us today to inquire about our bridging loans or to fill out an application.