Bridging loans could be a dangerous tool if they are used improperly. People who want to sell their homes and already have chosen a new one, apply for a bridging loan in Singapore to cope with the time gap. Singapore has a huge property market but no one is safe from property chain problems. For 2015 in Singapore 23 161 properties were sold as this number is rising every year more and more. People use bridging loans as a last option due to several reasons – one of them is the higher interest rate. It means the price of the loan is expensive but if the stake is to lose what you already have invested in the new house or apartment then the price is reasonable. Because your taxes in purchase process are an investment, too.
When should you not take a bridging loan in Singapore?
Imagine that you have found the perfect house and you desperately wanted to have it. You know that you can’t use a credit card for it. You have published an add for your own home but there are no people who desire to buy it. Then you have contact with an agency, but they can’t find interested people, too. So you are in front of a problem – stuck with your old home dreaming for the new one. Then you see an ad for a bridging loan. Do you know what you should do? Ignore it! That’s right bridging loans are not for people who are not sure they will manage to sell their old property on time. In the end, they will be with 2 mortgages and no hope left.
What are different bridging loans?
Bridging loans in the market are two main types – opened and closed. The closed bridge is a more favourable loan because the client has already found a buyer for his old property. The exchange has already happened and the risk of loss is a minimal one. In contrary, the open bridge is with higher risk because the client doesn’t have a dependable buyer. The moneylender will propose to make a double mortgage on both properties and lower their value. People should be extremely careful with this practice because it may ruin their financial stability.
What will moneylender ask you?
Bridging loans are coming with a high risk so moneylenders will want to know specific things in order to guarantee their investment. For example, they will ask the client about documents for evaluation of both properties. They will want to know what is the optimal and the worse repayment plan. They will want to know what are the chances to stop paying repayments, also. If the bridging loan is an open one they will give 12 months gratis period if something went wrong. Of course, the interest rate will rise with months passing. The limit of a year is the maximum one because moneylenders can’t wait forever and the market is not so stable. You probably know that property market can cause shocks to the whole economy. Loansingapore.sg provides a comparison list with the best bridging loans in Singapore to pick.
Why is interest rate higher?
The answer is pretty simple – because the convention has its own price. People avoid bank application process because it takes time and resources while moneylenders will give you an offer in hours. In addition, some moneylenders offer to give you the loan the same day and the application process is easier. The interest rate may be higher if your repayment plan is not stable, too. The moneylender considers every aspect of the deal including the risk.