How Does A Temporary Bridging Loan Works?
Are you planning to sell out your current house to buy a new home? Unfortunately, your finances cannot suffice your new purchase.
Well, a bridging loan can help you be one step closer to your dream home. But don’t forget one tiny detail. Applying for the loan must be the same bank as your mortgage.
Are you curious how a temporary bridging loan works? Find the answers you need here in this article.
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What Is Bridging Loan Singapore?
A temporary bridging loan provides the funds needed for your next house purchase. It is beneficial. It keeps your finances afloat while waiting for the sale proceeds from your current house.
The bridging loan is best for individuals who intend a home upgrade. For example, you’re living from an HDB flat and plans to move into private property. The loan suits you since procurement requires a hefty sum for a down payment.
Nonetheless, bridging loans are not solely for private property buyers. It can also bridge the financial gap when buying an HDB flat.
Types of Bridging Loans
When considering taking out a temporary bridging loan, you have two options.
Capitalised Interest Bridging Loan
In this type of loan, you don’t have to worry about two different loans simultaneously. Your chosen bank pays out the entire new house. Then, start paying your mortgage once you sold your old home.
Simultaneous Payment Bridging Loan
Just like its name, it works in pairs. It means you pay off the home loan and the bridging loan simultaneously. Then, you must sell your old property and start loan repayment. Yet, you have to do these in 12 months.
Knowing facts will help you decide on anything you plan to do, especially when it comes to finances. From the two types of bridging loans provided above, assess which will best fit your needs.
Indeed, Temporary Bridging Loans stand by its name. It is a financial solution you need, all the while selling your previous property.
5 Tips On How To Apply For Bridging Loan In Singapore
Once you’ve decided to take a Temporary Bridging Loan, consider these details in your preferred bank.
Know the Loanable Amount
A temporary bridging loan can only finance up to 25% of your new home’s cost. So, it is sensible to borrow the amount needed to cover the down payment. It can even complete the property transaction.
But, always take into consideration the high-interest rate and shorter loan tenure.
Understand the Loan Tenure
Bridging loans are usually short-term loans. Bank tenure depends on the bank policy. Some take up to six months to repay the loan.
Nevertheless, note the amount you borrow and the interest rates that come with it. A short-term loan chalks up the monthly repayment.
Calculate the Interest Rate
Taking up bridging loans in Singapore goes along with higher interest rates. It typically ranges from 5% to 6% p.a.
Luckily, banks are considerate of their borrowers. Some banks allow you to repay the interest first, and then you pay off the bridging loan. That is when you have received the proceeds from your previous house.
Estimate the Monthly Repayment
The monthly responsibility is something you have to think about. With your regular expenses, decide if adding another repayment is feasible to your budget. Have important regard with your savings. Also, don’t forget that the amount is on top of your mortgage.
For sure, you would not want to compromise your daily expenses for your new home, right?
Be Prepared for Risks
A temporary bridging loan in Singapore is a risky financial endeavour. You take out a large sum of a loan before you receive the property sale proceeds. Also, you have to pay for a higher interest rate in a shorter period. That’s why banks use the borrower’s property as collateral.
Who is Eligible for Temporary Bridging Loans?
With the risks entailed with bridging loans, applicants must assess themselves if they are qualified or not.
Singaporeans, Permanent Residents, and even Foreigners can apply for a temporary bridging loan. But it is a must that the borrower has a property to sell in Singapore.
A healthy credit score has a positive impact on loan approval.
Complete the Documents Required
Here is the paperwork one must prepare for the temporary bridging loan application.
Option to Purchase (OTP): A document that indicates you have the right to buy an apt property.
Bank Loan Statements: Banks require that you apply for the same institution you have your mortgage.
Central Provident Fund (CPF): The withdrawal statements are necessary. It allows the financial facility to see where the proceeds will be available.
A bridging loan is a significant financial aid for your home buying experience. It is a short-term loan used to finance a property purchase. But just like other solutions, you need to be knowledgeable.
Facts can tell what you need.
Getting a loan with less information might let you fall into false expectations. Of course, we don’t want that to happen. Facts will help you tell which meets your current needs.
For instance, you need money for home improvements. A renovation loan can help you. It’s also a short-term loan you can use to make a home makeover, for instance. Thus, there are loan products designed for a particular purpose.
If you need a loan for home renovations, you can seek financial help from moneylenders. Getting a loan from a licensed moneylender will ensure security for customers.
The Ministry of Law Singapore provided an official list of licensed moneylenders. Customers can check on it and choose which moneylender they would want to transact with. In this way, it ensures that the customers transact with legal lending entities.
Why Get A Loan from Cash Mart Singapore?
Cash Mart Singapore is one of the trusted moneylenders you can find in the country. For more than fifty years, the company has well-served its clients. But, until now, the company thrives on extending financial services to every citizen.
Low credit score? Don’t worry. Cash Mart welcomes applicants regardless of their credit history. That’s one of the reasons why Singaporeans trust the company’s services.
Here’s what you need to meet when you get a Renovation Loan from Cash Mart:
People who can get a loan from moneylender Cash Mart
Singaporeans, Permanent Residents, and Foreigners are eligible to take out a personal loan. Yet, the applicant should meet the age limit that is from 21 years old and above.
Regardless of your employment status, you can apply for a loan. And most importantly, borrowers must have no undischarged bankrupt or bankruptcy proceeding.
After assessing yourself, gather all the requirements.
- Salaried or Commission-based Employees: NRIC, SingPass Login with 2FA, proof of billing, last three-month payslip, and letter of employment
- Self-Employed Individuals: NRIC, SingPass, proof of billing, Notice of Assessment, and ACRA.
- Taxi Drivers: NRIC, Vocational license, Taxi Pass, 7-day job summary, and proof of billing.
The loanable amount depends on the borrower’s annual income.
For an applicant with less than $20,000 annual income, the loan amount is up to $3,000. While for applicants with a yearly income between $20,000 and $30,000, the loan amount is up to two months’ salary.
An applicant can get a loan amount of up to four months’ salary. That is, if they earn an annual income between $30,000 and $120,000.
But those with more than $120,000 annual income can loan any amount they desire to.
A Renovation Loan by Cash Mart charges an interest rate of not more than 4% every month. As mentioned, the company abides by the Moneylenders Act, in which interest rates are capped to 4%. Moneylenders offering more than the stated rate will result in license revocation.
A diligent borrower knows how important on-time repayment is. If not, they have to settle unnecessary fees.
You’ll get charged with a Late Repayment Fee which does not exceed $60 for each month.
After being granted the loan, a fee not exceeding 10% of the principal loan amount. The court implements legal Costs. It is charged for every successful claim for the loan recovery.
From personal needs up to your home needs, Cash Mart can support your goal. You’ll get the opportunity to expand your space or bring your family into a better place to live. Yet, it comes with a large sum of money.
Thankfully there are financial institutions readily available to provide financial support. All you have to do is choose wisely which is the best fitting for your financial needs.