When you are changing your current residence to a new house, you will require financial help, especially during the short notice of moving to a new home. All over UAE, lenders are always ready to help financially to their clients. The most common loan that you can avail of during this situation is a bridge loan. If you do not have any idea about this loan type, don’t worry because you are in an accurate place. Here, we are exploring Bridge Loans and their uses. So, then will have a clear idea about this loan and then you will apply for it with more confidence.
To avoid the situation of traditional baking’s tough rules and time requirement for getting debt approval, online financial lenders are also present in the country. Such lenders also give the services of a bridge loan just like other mortgage loans. The speciality of Loansforgulf is that they are amazing in their high-quality services and they provide loans without any processing fee. And so the debt’s cost is not higher.
What are bridge loans?
One of the types of short-term debt is a bridge loan. It is specifically provided to those applicants who are moving from one home to a new one. The current house works as collateral during the loan application process. The requirement of collateral is the same as a mortgage or home equity debt. You have also an option of using another asset as collateral. The buying of a new home is costly and then you must take this loan to manage your financial expenses.
How do bridge loans work?
These loans have different costs & conditions. The most common repayment period for this loan is from 6 months to 12 months. When you get a qualification for this debt, you will receive a large amount of funds at a time. Some lenders offer it with the monthly repayments. The interest amount in every repayment will be added. The financial market is wider and you get easily the best option from the lender for this debt.
Application procedure for a bridge loan
Just like other procedures for applying for a mortgage, the bridge debt procedure is very similar. The lenders check the applicant’s creditworthiness through the credit scores & DTI ratios. The UAE’s lenders’ basic criterion is to offer 80% of the new home’s cost and the remaining 20% is a down payment. Some of these loans are costly because of origination fees.
The loan requirements are compulsory to meet just like all other loans. Loansforgulf’s criteria for eligibility are not tough, that’s why every applicant easily gets the debt from this company. The lender’s rules for this loan’s requirements are not the same but the most common of them for this bridge loan are:
Equity: The demand for equity for this debt is at least 15% and 20% in a current house.
Credit score: The lenders’ good point of this loan service is that all applicants with low credit scores are also eligible the apply. Some providers demand a minimum credit score of 500 or 600 for the approval.
DTI ratio: The low DTI ratio is suitable for instantly receiving the debt’s approval. But, the higher ratio also gets this loan but it should not be more than 60%.
Uses of bridge loans
Due to so many uses of bridge loans, people prefer to apply for it when they change their home. And, as a result, they will easily manage their financial needs. Now, we are discussing the debt of bridge’s impressive uses:
The transaction of the debt amount is faster after the approval. You will receive the cash amount in just a few days when the lender sends you the notification of an approved application. It is a wiser way to get financial help when you change your house and buy a new one for any emergency need. Most individuals take this step when their location of work changes.
Cover all finances:
For the buying of a new home, this loan covers all finances. The interest rate is not higher, so you will easily pay off the amount. During this period, you get time to find a new buyer for the selling of your old house.
No need for contingency:
If you do not take a debt, you will need to sell your old house and then buy a new one more easily. But, selling an old house also requires time because you have to find a person who will purchase your house at a good price. Therefore, with the help of a bridge debt, there is no need for contingency for the selling of the old house. Without selling of old one, the lender gives you the funds of this debt and thus you will able to buy your new house with no stress of how to manage finances.
This short-term kind of debt is also with great payment flexibility. When borrowers take a loan, they worry about how to repay the amount more conveniently. But, this debt comes with flexible terms of payments. It is also a major reason for people’s choice of this loan’s use. Its monthly payments do not start during the initial months of the tenure. So, you will get the relaxation of not repaying the debt instantly after receiving it. Moreover, the monthly payments are not higher.
The overall cost of a bridge loan
Few lenders offer it with an interest rate of 8% that you will be required to pay with the debt fund. However, the closing cost is at the rate of 2% to 5% of the total borrowed fund. You must compare the closing costs of different lenders. So, after comparison between different lenders, you will select an ideal one.