What Is a Transitional/Relocation/Bridging Loan?
Potential borrowers researching the various types of loans available to them may want to learn more about transitional loans. Transitional loans are often referred to as relocation or bridging loans. This type of loan is considered to be a short-term loan that is designed to help homeowners purchase or build a new home while waiting on their existing home to sell.
Transitional loans come along with a wide variety of advantages and disadvantages that a homeowner should be aware of before making any decisions. The following examples are the various advantages a homeowner can face:
- Homeowners can purchase a home immediately without having to wait for a home loan approval
- Homeowners can avoid paying for moving costs or rent
- Homeowners are not required to make home loan repayments until their existing home has been successfully sold. They will only be required to make repayments on their existing mortgage agreement
- Homeowners are not required to sell their property immediately and can wait until they receive the best offer
The following examples are various disadvantages a homeowner can face with transitional loans:
- Homeowners who do not sell their existing home within 12 months will be required to pay an increased interest rate
- Interest will be compounded monthly on the transitional loan
- Homeowners are required to order and pay for valuations on their existing property
If you would like to learn more about transitional loans, reach out to the Mortgage House lending specialists for additional information and assitance throughout the application process.