Everyone is in the need of financial support at certain times in their lives. No matter if you are running a business or if you need financial support as an individual, you have to make the right choice so that you don’t end up drowning yourself in fees, interest rates, and charges. The easiest way to do that is to choose the right type of financing for your specific needs.
In this article, we are going to tell you what is an open-ended bridging loan and how you can use it to your advantage depending on your specific situation.
What is it?
There are many different types of mortgages and loans that we can take when we are in the need of some financial support but as we already know some are better for specific things than others. When we want to purchase or remodel a business, commercial, or residential property we tend to need a lot of money.
Not many of us can afford this and since the majority of the population already has some type of existing loan that means that if we want to do the purchasing order remodeling, we would need to get a second mortgage or remortgage the property that we desire.
The bridge loan is what is used to finance this process and it is considered to be ideal for those who want to invest in a property through action. There are two main types of bridging loans, open and closed.
Now we’re going to give you more information on the open-ended bridging clone and white people opt for it. We will also discuss some of the positive and negative sides of it and what you need to be aware of in case you decide to choose this type of financing.
Since we are talking about loans, you may want to check out this article: 5 Things You Should Know About Quick Loans in The UK
This type of open financing means that there is no deadline or a final date to pay the loan back and there are no penalties if you don’t meet the end date when you needed to give the money back.
We are used to a type of mortgage where we are forced to pay close attention to the end date and when we don’t want to be pressured and when we don’t want to be stressed about when we need to pay it back and what we need to do, the solution to this process are the open-ended financings.
Overall, these bridging loans give a lot more flexibility to the users, and even though there are some negative sides as well to the whole process, ultimately they are something that will remove the stress of paying the money back when you are not ready to do that.
What are the benefits?
When it comes to the benefits of open bridging loans the number one advantage is the removed pressure that comes with being alone back. You can purchase your new property right away and you don’t have to wait to get the financial support you need.
At the same time, this process will give you the needed time to get the price that you want and you will be able to sit and wait until the property is sold at the price that you have wanted.
Even though this loan is somewhat more costly than the traditional types of loans you should know that you will have the same charges and fees that come with the traditional types of financing. This means that if you want to pay the money back faster you will not pay a greater interest than you would with any of the other types of mortgages.
With this type of financial support, you will avoid any of the costs that come with refinancing or getting out a second mortgage and you will also avoid additional fees that come with renting and moving twice or even three times. You are not limited to a certain number of P&I repayments and this will give you the opportunity to minimize the interest that you will have to pay.
What are the drawbacks?
Now that you know more about what these bridging clones are and what the positive sides of them are, let’s talk about some of the negative sides and why you need to do a lot of research and be prepared for anything that might happen.
The biggest drawback of this financing process is that they tend to have higher interest rates and the overall cost is going to be much higher than some of the other types of traditional financing. Keep in mind that since you are not going to put an exact date of when you are going to pay the loan back the lender is put at a much greater risk.
Because of this, they need to protect themselves and the rates that you will pay will be much higher. Just like with every other type of financing the more time you need to pay it back, the more costly it is going to be. Even though there is no technical deadline that you would need to follow, it is going to work in your best interest if you pay the support back as soon as possible.
A big thing that you need to be aware of is that not every lender offers these types of financing so in case you want to switch lenders or if you want to terminate your current mortgage to be able to take this type out, you will need to pay the termination fees. Sometimes these fees can be pretty big and you need to see if it’s good for you or if you can afford that.
Note that if you want to make repayments during the terms but in case you need to redraw the contract you will not be able to do that. This type of support does not usually come with a redraw facility so you need to keep that in mind in case you want to go with it.
As you can see, this type of support is great for both individuals and company owners and even though it comes with some drawbacks ultimately the positives outnumber the negatives. Talk to your financial advisor to see if this type of financing would be the right type for you and make sure you choose the right lender that will give you all the support and benefits that you require.