A bridging loan is a short-term loan that helps individuals or businesses to bridge the gap between the sale or purchase of a property. This type of loan is not very common, but it can be beneficial for those who need the financial assistance to manage the timeline between the sale of their existing property and the purchase of a new one. In Singapore, bridging loans are available to help people meet their financial needs and make the transition between properties smoothly. In this blog post, we will discuss all that you need to know about bridging loans in Singapore.
What is a bridging loan and how does it work in Singapore?
A bridging loan is asset-based financing that provides short-term cash flow to borrowers for a specific purpose, such as purchasing a new property before selling an existing one. Bridging loans usually have higher interest rates than conventional loans because of their short-term nature. In Singapore, bridging loans are offered by licensed financial institutions and regulated by the Monetary Authority of Singapore (MAS). Applicants must provide proof of income, credit score and ownership of property before applying.
Types of bridging loans in Singapore
Bridging loans in Singapore can be divided into two types: open and closed bridging loans. An open bridging loan is suitable for borrowers who do not have a definite timeline of when they will be able to sell their existing property. In contrast, a closed bridging loan is for borrowers who have a confirmed sale of their existing property and a clear timeline for when they will receive the proceeds. Open bridging loans are riskier than closed bridging loans, hence, they usually have higher interest rates.
The repayment process
Borrowers are required to make monthly interest payments on the originating principal amount. Once the borrower receives the funds from the sale of their existing property, they can use the proceeds to repay the bridging loan. Alternatively, if the borrower is unable to sell their property within the agreed timeline, they must convert the bridging loan into a long-term financing option such as a mortgage or personal loan.
Eligibility for a bridging loan in Singapore
To be eligible for a bridging loan, borrowers should have a good financial track record, a stable income source, and own an existing property. Some lenders may also require the borrower to have a certain level of equity in their existing property. Additionally, borrowers should ensure that they understand the terms and conditions of the bridging loan and are satisfied with the interest rates and fees.
Benefits of bridging loans in Singapore
Bridging loans in Singapore have several benefits for borrowers. They provide a quick and easy source of financing for property purchases, enable borrowers to secure properties with competitive prices, and allow borrowers to have flexibility in the payment process. Additionally, bridging loans have a short repayment term, which provides peace of mind to borrowers, and they do not require borrowers to have a prior mortgage.
A bridging loan can be beneficial for individuals and businesses looking to purchase new properties while still managing the timelines between the sale and purchase. To ensure that you meet the eligibility requirements and understand the terms and conditions of such loans, approach licensed financial institutions like OnLine Credit. They will help you determine if a bridging loan is right for you and provide the financial assistance you need to ensure smooth property transitions. In summary, bridging loans in Singapore can be the perfect financing solution for your short-term needs, so consider it as an option for your next property purchase.