A bridging loan is a short to medium term loan used until a person or company secures permanent financing or removes that bridging debt obligation. It allows the user to meet current financial obligations by providing immediate cash flow. Bridging loans are short term, up to one year, backed by real estate.
Both businesses and individuals use bridging loans and Eastwood Securities Mortgage Fund can customise bridging loans for many different situations. All of our bridging loans are interest only.
Bridging loans usually have a faster application, approval, and funding process than traditional loans. One of the most important considerations is to have a realistic exit strategy, such as a clear strategy for the sale of your current property or the ability to source funding to payout the bridging loan. This can be by sale of other property, stock or other assets such as shares.
Businesses turn to bridging loans when they are setting themselves up for long-term financing and need money to cover expenses in the interim. For example, imagine a company is doing a round of equity financing expected to close in six to twelve months. It may opt to use a bridging loan to provide working capital to cover its payroll, rent, utilities, inventory costs, and other expenses until the round of funding goes through.
Bridging loans can help homeowners purchase a new home while they wait for their current home to sell. Borrowers can use the equity in their current home to contribute toward the purchase of a new home. This happens while they wait for their current home to sell.
This gives the homeowner the opportunity to buy a property that they particularly want without having to sell their existing home first and possibly missing out on that purchase or avoid the costs and hassle of having to rent a home in the period between the sale of your existing home and settlement of your new home.
Depending on how your loan is structured, during the bridging period, you may either make monthly payments of interest only, or capitalise the interest cost into the loan amount such that you do not make any repayments on your mortgage during the loan term.