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Bridging Loans as a Short-Term Financing Option for the Homebuyer

Bridge loans are a form of financing that are offered by banks and companies to their clients and businesses. It is always the case that as a homeowner, when you are looking forward to the purchase of a new home while still in the process of disposing of the old one, there will be a crisis for the need of money for the need to buy the new one. There are as well borrowers who go for these loans for the purpose of helping with the need to settle their divorce expenses, settle the estate expenses such as taxes and still others use the money to help save some of their key investments from foreclosure. For those looking forward to making a new home purchase, the bridge loans can be of great help for them to make the required deposit for the purchase. Bridge loans and the home equity loans are the two alternative financing options that as a home owner you will have before you when it comes to such times of financing. Below we will be taking a look at the two alternatives at hand for your financing needs as a borrower.

The first fact is that when it comes to the home equity loans, as a borrower you stand to benefit from the fact that these loans come at such low interest rates. With this as low as it is, the risky and most costly aspect of the home equity loans is in the fact that you stand the risk of losing your home in the event of default. Bridge loans are however another alternative financing that has your house as collateral anyway. Bridge loans however have a number of benefits and one of these is the fact that they do have quite a short term, being short term loans whose terms never go beyond 3 years.

As such you see that the balance on your head will only be spread over a couple of months and you will be done with the loan as opposed to what is in the home equity loans where you will have to deal with this over a period of up to 20 years. Remember the fact that when it comes to loans, the longer the repayment period, the higher the risk that at some point in time they may get to default and the risks of losing your pledged collateral happen to be as apparent. The other benefit of the bridge loans is the fact that there are no repayment penalties and as well borrowers can choose a repayment option and pay the loans earlier.

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