5 Steps to Take to Maximise The Value of a Bridge Loan
Bridge loans are useful when you want to sell an old property and buy a new one. As the name suggests, this loan bridges the gap between the sale of your old property and the purchase of the new one. Specifically, it helps you secure the new property while you wait for your old one to be sold.
Bridge loans are high-value, so you can apply for them only in banks or more established legalised money lenders in Singapore. You must provide evidence of the value of your old property, which you want to sell off. Also, you may need to give your lender documentation about the new property you intend to purchase.
To maximize the value of your bridge loan, take these five steps.
- Devise an exit strategy
Before you apply for a bridge loan, have a clear plan in place for repaying it. The money you get from the sale of your old property is the obvious choice.
But in case of delays in selling, you need to figure out contingencies. These should allow you to still pay back the bridge loan on time. This way, you will avoid late payment fees and more interest.
- Negotiate terms with your lender
Talk to your bank or lender first if you can agree on terms that are favorable to your financial situation. If you can come up with an ideal tenure, monthly repayments, and interest rate, the loan will become easier to pay back later. You can then make sure that your old property gets sold to a good buyer.
- Sell within the tenure of the bridge loan
Aim to sell your old property before the tenure of your bridge loan expires. This way, you can be sure that you will have the funds to pay back the loan on time. Otherwise, you could be slapped with late payment charges and more interest.
- Leverage your existing equity
The equity on your old property is usually the basis for your bridge loan. The higher the equity, the more you can potentially borrow. In turn, you can be sure you will have enough funds to purchase the new property.
- Prioritise paying off the bridge loan
Once you have bought your new property and sold the old one, pay off the bridge loan the soon time you can. This way, you will minimize the overall cost of the loan. You can avoid paying more interest as well as any late payment charges.
Most importantly, paying off your bridge loan on time will improve your credit score. Since this kind of loan has a high value, it has a much bigger impact on your credit score if you pay it off as soon as you can.
Conclusion
Bridge loans are quite helpful in buying new property. The loan gives you the money you need to purchase while waiting for the sale of your old property. Make sure to take these five steps to maximize the value you get out of your bridge loan.
