Owing a dream home is everyone’s dream. But due to lack of money and low budget many people are not able to purchase their dream home and they go for a home which cost them less. But the fact is ups and down are part of life, financial condition never remains the same. With growing time, money also grows as people get hike in their salary as their age and experience increases. Now when they can afford their dream house should they remain in their existing home? The answer to this is definitely no, they can purchase their dream home by selling the existing home.
But a problem may arise here: what if someone decides to sell their existing property and purchase a Dream Home but are unable to get a buyer for their property at that particular time. Should they let this dream home go? As it can be purchased by any other or the price may rise which they might not be able to afford. Bridge Home Loans are the solution to this situation. A Bridge Home Loan provides money which allow people to make a down payment and buy their new house.
What is a Bridge Home Loan?
Bridge Home Loans are temporary loans taken by a property holder to bridge the gap between the selling of an existing home and purchasing of a new home. In the case when the existing property is not sold.
The bridge loans are secured to the buyer’s existing property. The money from the bridge loan are then used for the down payment for the move-up home (new home).
How to avail a Bridge Home Loan?
Availing a Bridge Home loan is similar to as availing a home loan. The eligibility and documents required here are same as that of a general home loan.
But before knocking the door of any lender for any Bridge Home loan, one should be clear about the home which they are going to purchase. This is a mandatory thing for a bridge loan.
For the consideration of a Bridge loan application it is important that the borrower should sign an agreement that they are going to sell their property. For this loan the borrower should also provide a complete detail of the house they are going to purchase. In case if the borrower is a senior Citizen of India then their hier, whether son or daughter, all would be equally responsible for the repayments.
If the borrower is not able to find any buyer for the pre-existing property (old one) within a particular period of time which is usually 6 to 12 months (varies from lender to lender) then in this case bank has the authority to convert the old property as a mortgage one. In this case the interest rates will also increase a lot.
Features of Bridge Home Loan
Loan Amount: Loan amount generally depends on the repaying ability of the borrower and also on the cost of the property including the registration fees, stamp duty fees etc. Basically the loan amount can be 5 times the gross salary of the borrower.
Interest Rate: To avail a bridge loan the borrower needs to sell his previous property so, the interest will be taken for the outstanding amount which is left after paying the amount by selling the property. Generally the interest rate of a bridge loan is higher than the normal home loan but the advantage with it is it is for a shorter period of time. Hence you will be paying less in interest.
Comparison of Bridge Home Loans Interest Rates
|BANKS||BRIDGE LOAN RATE|
|SBI||First Year – 10.45% p.a.
Second Year – 11.45% p.a.
|HDFC||Residential Property -12.30%
Commercial Property – 13.15%
Maximum Time to sell the Property: As in the agreement the borrower has already agreed to sell the pre-existing property. The time period in which they get to do so is a maximum of 24 months and a minimum of 6 months.
Benefits of Bridge Home Loan
- With the help of a Bridge Home Loan one can buy a new dream home even before selling the existing home.
- The interest payable for this loan is applicable after few month after they take.
- Even when the borrower is not able to sell the old property in the provided duration of time, even then the ownership of the new property will remain with the borrower. The lenders can keep the old property as mortgage.
- It is a short term loan that means while anyone opt for this they will be paying less in the interest as the tenure period is less.
Drawbacks of Bridge Loans
- Bridge Home Loan costs much more than home equity loans and any other home loans.
- Buyers can only borrow when they get the permission from the lender and when they sign an agreement to sell the existing property.
- Making two payments for the mortgage loans along with the interest rates can make the borrowers life stressful and financially difficult.