Licensed moneylenders and financial institutions provide users with access to the money needed for buying a new property. Property bridging loan in Singapore can be the ultimate financial solution for people buying a property at an auction.
It is best to take note that property bridging loans come with a hefty interest rate. Moreover, the administration fee can cost a fortune to the borrower.
Getting the Property Bridging Loan
Just like short term loans in Singapore, there are criteria for the borrower to meet before they can acquire the desired loans. There is no way for the borrower to secure an easy loan approval. In order for the borrower to be eligible for property bridging loans, they would need to own one or more properties. However, there are eligibility criteria that a borrower needs to be able to qualify for before being granted an easy loan approval. Here are the steps to help you acquire a property bridging loan.
Compare the Interest Rates and Overall Fees
Depending on the money lending institution you chose, the interest and fee amount could vary significantly. You must check the terms and conditions of the providers before settling the deal. In the case of bridging loans, it could last for a few months. This allows the borrowers to pay back the interest in the following ways:
By opting for monthly-basis interest payment, you need to pay a certain percentage of interest every month to the institution. Now that you are paying interest every month, it won’t be added to the total loan amount.
This is when the borrower is supposed to pay the full compound interest together with the total loan amount by the due date.
As mentioned before, the interest rates in the property bridging loan can be higher than the regular loans. If you aren’t comfortable with paying interest every month, you can opt for the rolled-up interest plan and pay the total interest amount on the repayment day.
The loan also involves administration fee, appraisal fee, escrow fee, title policy fee, wiring fee, notary fee, and more. Make sure that you calculate and compare the cost before applying for the bridging loan.
Decide the Repayment or Exit Strategy
Bridging loan is a temporary funding solution. You only get short repayment duration, by which the loan amount along with the interest and fees, should be paid off. Before you even decide to take out the bridging loan, consider your repayment options. Usually, borrowers pay off the bridging loan through:
- Sale of their Existing Property
- Refinancing to other debts
When it comes to the property bridging loan, the most suitable option for borrowers is the shortest possible repayment plan. Since these loans come with a hefty interest rate, it only makes sense for buyers to take out short term loans to help them reduce the interest burden.
You don’t want to end up insolvent at the end of the loan period. That being said, you must consider your exit strategy or repayment options before applying for bridging loans. Usually, the borrowers pay off their debt from their property sale, but you can also opt for long-term refinancing solutions if it is ideal.