Are you in the market for a bridging loan? Bridging loans are a great way to finance the purchase of a new home before your current property is sold. They are also useful for bridging the gap between selling your old home and purchasing your new home.
Are you wondering how long does it take to get a bridging loan?
Unfortunately, there is no definitive answer to this question. The amount of time it takes to get a bridging loan will depend on a number of factors, including the lender you choose and your financial situation.
In this blog post, we will discuss some things that can affect how long it takes to get a bridging loan. We will also provide some tips on how to speed up the process.
What Is A Bridging Loan?
A bridging loan is a short-term loan designed to help people bridge the gap between one financial obligation and another. This can be particularly useful for those who need extra money to make major purchases such as purchasing a home.
For instance, bridging loans can also be used to bridge the gap before the sale of your old home is completed and when you need funds for the downpayment of your new home.
In order to qualify for most types of bridging loans, borrowers must usually present evidence of sufficient collateral in the event that they are unable to repay the loan according to its schedule.
In addition, many lenders will require prospective borrowers to have a strong credit history and good credit scores to be considered eligible for this type of financing.
Overall, bridging loans can provide much-needed relief to those looking to make large financial moves with confidence and security. They can be an effective tool for managing finances and planning ahead.
How Does A Bridging Loan Work?
The funds for a bridging loan are repaid with interest when the subsequent goal has been achieved. At this point, the borrower can access other long-term financing options such as a mortgage.
The loan is secured against an asset, such as property, which is used as collateral. This means that if you cannot repay the loan, the lender can take possession of your asset to recoup their losses.
Bridging loans are typically repaid over a period of six months or less, although some lenders may offer terms of up to 12 months. Some other key features of a bridging loan include its fast approval process, as well as its flexible payment terms, and its ability to offer funds upfront.
Many lenders offer customised rates based on factors like the amount borrowed and the expected timeline for repayment.
Overall, a bridging loan is an effective way to get the support you need to achieve your next financial milestone by helping you to make essential upfront investments without sacrificing other financial goals.
How Long Does It Take To Get A Bridging Loan?
The answer to this question varies depending on the lender and your personal circumstances.
Generally, it takes around two weeks to get a bridging loan in Singapore. However, some lenders may be able to approve your loan within a week or even sooner.
It is important to note that the time it takes to get your loan approved and funded may differ from one lender to another. Some lenders may require additional documentation or information in order to process your loan application, which can extend the timeline.
Your financial situation will also influence how long it takes to get a bridging loan.
For instance, if you have a good credit history and substantial income, you may be able to get approved for a loan more quickly than someone with a less favourable credit history or weaker financial profile.
In any case, it is essential to work with a reputable lender who can offer you a competitive interest and get you the loan in the shortest time possible.
Types Of Bridging Loans
There are two main types of bridging loans – capitalised interest and simultaneous payment bridging loans.
This type of bridging loan pays for the entire cost of your new property. You only start paying the mortgage once you have sold your old home. It is a good option if you don’t want to pay two loans at the same time.
If you take out this loan, you will repay your home loan first, then the bridging loan. You will be given 12 months to sell your old property and begin your repayment term.
What To Consider Before Getting A Bridging Loan
When considering a bridging loan, there are several important factors to take into consideration.
First and foremost, it is essential to determine the purpose of the loan and how it will be used. For example, if you need to bridge a short-term cash flow gap between purchasing a new property and selling your existing home, you will likely want to look for a flexible loan that can be tailored to your specific needs.
It is also imperative that you have a clear idea of both your current and future financial situation in order to ensure that you can meet repayments on time.
Other important considerations include the terms of the loan, other associated fees or interest rates, and the time frame in which you will need to repay the loan.
It is also important to remember that bridging loans are typically more expensive than other types of loans, so it is essential to shop around and compare different lenders before making a decision.
Finally, be sure to work with a reputable lender who can offer you a competitive interest. By taking all these factors into consideration, you can select the best possible bridging loan.
Documentation Required For A Bridging Loan Application
When applying for a bridging loan, most lenders will require a few documents, including:
- Option to Purchase (OTP): This shows that you have an exclusive right to buy the new property in Singapore.
- CPF withdrawal and outstanding bank loan statements: These documents prove your ability to repay the loan.
- Proof of income: This is another document that proves your payment capability. Lenders won’t risk losing their money to unemployed people.
- Credit score: Banks will check your credit report from Credit Bureau Singapore (CBS) to get your credit score and rating. You won’t be able to get a bridging loan if you have a bad credit score.
While the specific documentation required may vary from lender to lender, these are generally the most common items that will be requested.
Be sure to check with your chosen lender in advance so that you can have all of the necessary documentation ready when it comes time to apply for the loan.
By being prepared and knowing what to expect, you can streamline the application process and increase your chances of getting approved for a bridging loan.
How To Lower Your LTV Ratio Using A Bridging Loan
Your loan-to-value (LTV) ratio is the percentage of your property’s value that is being funded by a loan. For example, if you have a $300,000 mortgage on a property worth $600,000, your LTV ratio would be 50%.
In general, the lower your LTV ratio, the less risk there is for the lender. As such, many lenders will offer lower interest rates to borrowers with a lower LTV ratio.
One way to lower your LTV ratio is to use a bridging loan to pay off part of your mortgage. For example, if you have a $300,000 mortgage and you take out a $150,000 bridging loan, your LTV ratio would be reduced to 25%.
This can effectively lower your interest rate and save money on your mortgage over time. However, it is important to remember that you will need to repay the bridging loan in addition to your mortgage, so be sure to factor this into your budget before taking out a loan.
Pros And Cons Of A Bridging Loan
Like any financial decision, taking out a bridging loan has both its pros and cons. Some of the advantages of a bridging loan are that they can:
- Help reduce your LTV ratio and your interest rate
- Provide access to quick funding
- Serve as a good stop-gap measure
While they have numerous advantages, bridging loans:
- Are typically more expensive than other types of loans
- Often have shorter repayment terms
- Come with the risk of losing your collateral
Before taking out a bridging loan, be sure to weigh the pros and cons carefully to decide if this is the right financial decision for you.
Are You Looking for the Best Bridging Loan?
If you need quick funding for a property purchase, a bridging loan may be the right option.
But with so many lenders to choose from, it can be challenging to know where to start. Also, remember to consider how long does it take to get a bridging loan.
At Lending Bee, we specialise in helping our clients find the best possible loan options to meet their needs. We take into account your unique circumstances and put your needs first to find the best loan for you.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.