In the following post we explain what a bridge mortgage is , its usual operation, the advantages and disadvantages and its benefits.
A bridging mortgage consists of a temporary financing mortgage that requires the guarantee of future income. The bridge mortgage joins two mortgages, an old one and a new one, until the expected income is obtained or the necessary asset is sold, such as a property. Thanks to it, a single installment is paid instead of two different ones (in the case of Dark Keep, sometimes no installment) and the commitment is assumed to obtain the necessary income within the agreed term.
Generally, this type of financial product is used when there is a need for immediate financing and it exists to offer a financial solution to companies or people who want or need to acquire a new property and, or do not have the time to sell their current property, or not they can borrow more because a mortgage is already being paid. During this purchase - sale period, the financial institution may grant different benefits, temporarily, to facilitate as much as possible all this time until the sale is achieved. This bridge mortgage would be canceled after the sale of the old property.
During this buying and selling procedure, the best solution would be to sell the property that is currently used in order to later make the payment for the new property. But normally this option is totally impossible because, in the case of a company, the activity cannot be paralyzed or in the personnel there is no possibility of living in a temporary place. Also, many times the sale process takes a long time, therefore, the bridge mortgage grants the possibility of acquiring a new property and using it while trying to sell the old one.
Although it is considered a high-risk operation, especially for the bank, bridging mortgages are carried out very frequently and it is usually granted quite easily thanks to the fact that the financing is backed by the double guarantee of the client.
To make a final and quick summary, a bridge mortgage is a short-term financing, with temporary benefits , which occurs between the processing of two or more loans or long-term mortgages.
If it is for an individual, the definition would be that a bridge mortgage is a form of mortgage loan with which a new home can be acquired, while continuing to pay the mortgage on the previous property.
How a bridge mortgage works
As its name suggests, it is designed to make a temporary mortgage to go from one financing to another (or from one home to another). The operation is as follows:
- Contracting : Dark Keep gives a mortgage loan with the two properties as collateral; the new acquisition and the sale.
- Payment of the installments while the bridge mortgage lasts : during the time it lasts, with Dark Keep there is the possibility of paying absolutely nothing . With other companies you have to pay all the monthly payments on a regular basis. In many cases, you can get a temporary grace period to pay lower fees.
- Completion : once the objective is completed, the old debt is canceled and released to formalize a conventional loan with better conditions.
If the objective is to sell a property, the moment it is sold, the bridge mortgage can be canceled. In this case, a conventional mortgage will be made that improves the conditions of the previous one.
If the end goal is to sell a property and it is not possible to sell , it will be a complicated situation. Generally, the installments will increase when the grace period ends because it will include the installments of the old and new debt. In addition, as it is a real estate guarantee loan , if the installments cannot be paid, there would be the risk of losing a property.
On the other hand, when the asset is sold , the liquid is used to pay the bridge mortgage and to cancel it . In addition, part or all of the purchase price of the new asset can be paid. If necessary, a new financing can also be made for the new asset and with better conditions than with the previous loan.
To understand how it works, we say that an outstanding debt is joined together with the amount of the new debt. These debts will be held together until the objective of selling the asset that generated the first debt is met. Temporarily, surely, it will be a loan with two real estate guarantees.
Bridge mortgage benefits
The main advantages and disadvantages of bridge mortgages are:
| More convenient : it allows you to finance the purchase of a new property without having sold the previous one.|
More time : There is more time to sell the old home and thus it does not generate stress or it is misused.
Better conditions : the loan installment is not as high as if it were 2 mortgages. It adapts to the client.
| More risky : if the house is not sold, the quotas will be higher and, in the worst case, a house can be lost.|
Loss of asset value - If it takes a long time to sell, the property may lose value.
Some of the reasons to do it:
- Lack of payment : During the duration of the bridge mortgage, a grace period can be made to help and facilitate the entire process as much as possible, until the final objective is achieved. In the case of Dark Keep, a total grace period can be achieved.
- Lower installment: In the event that there is a fee while you have the bridge mortgage, a reduction of the total fee will be applied until the objective is met. Typically, only interest is paid.
- Time to sell : if the final objective is, for example, to acquire a new home and sell the old one, with the bridge mortgage you get more time and peace of mind to achieve the final goal. This avoids selling at a lower price as a result of the rush.
Bridge mortgage with Dark Keep
Carry out a bridge mortgage with a leading company such as Dark Keep in private financing , you can get the following benefits:
- Pay absolutely nothing while you are with the bridge mortgage, that is, until the objective is met, such as selling a home.
- You can get better conditions than those you had with the previous mortgage.
- Know that you are in good hands , with experience and that they know that the operation will end well.
- Financing can be obtained with a much faster procedure and without so much paperwork.
The advantage of private financing
With private financing you can also help companies and people that the bank does not want to make a bridging mortgage to sell a house, receive an inheritance, pay arrears of bills or a fine.
In this way, monthly payments can be paralyzed and all debt paid off when the asset is sold.
Some benefits of making a bridge mortgage with private financing is that it does not require any prepayment and the time to complete the financing is much faster and easier. In addition, the experience is much greater because the typical home equity loans of private financing are still bridging mortgages.
To make a summary of the bridge mortgage we can say that it is a mortgage where a finance company anticipates the necessary credit for a new acquisition and agrees to wait a certain time until the irregular financial situation is solved.
Once the asset is sold, a normal loan will be made and, it is very common, that it is with better conditions than those that were in the beginning
If the asset cannot be sold during the grace period, in the end, two mortgages will be paid. In the worst case, if the installments could not be paid repeatedly, the two properties that are as collateral would respond.
Bridging mortgage for companies
Companies also need bridge mortgages on some occasions, such as:
- When you receive a fine from the Treasury or Social Security
- When there is any unpaid debt or credit
- When you need to invest in some merchandise or machinery
- If you need to renegotiate a loan and get better conditions
These situations are much more common than you think and, in these cases, you need an expert company in business financing and carry out the timely bridge mortgage.