Friday, 12 April 2013

Financial Bridges



Bridge loans are designed to meet needs for the interim period, between sale of an existing house and purchase of a new one.

Apart from offering regular new housing loans, financial institutions offer the facility of bridge loans too.

The interest rates for bridge loans are higher than the normal long-term loans since the duration of bridge loans are shorter.

Home bridge loans are specially designed to meet such requirements for the interim period between sale of the existing house and purchase of a new one. The HFI will lend approximately 80 per cent of the value of the new property.

The compulsion of arranging the immediate substantial payment to the builder was the deciding factor for the choice of loan. And the couple opted for a bridge loan from a housing finance institution.

This is useful when you do not want to take a long-term home loan. It gives you enough time to sell your existing property and make payment for the new house and also pay off the loan quickly.

How to go about it


The loan will be sanctioned only upon entering into a formal sale agreement with the builder of the new house. The documentation process will be similar to that of taking a loan on a new house/flat but the duration of the loan will have to be defined, which usually will be for a period of two years. The interest rates for these types of loans are higher than the normal long-term loans since the duration of bridge loans are shorter.