A bridging loan requires collateral. An applicant uses their home as security for the short-term financial solution or their home’s equity. In both cases, the additional debt poses a risk for the applicant and the lender. Applicants who receive bridging finance are among the most qualified candidates. They take on two mortgages simultaneously and additional debt on top. Lenders work with established clients of brokers because they’ve developed a business relationship.
Lenders, such as Mortgage Street, use innovative tools that nail down a solid compromise between the two parties. Home equity serves as viable security for the financing, but it must meet certain thresholds.
A lender takes into account the current home’s worth and the outstanding mortgage amount. They look for at least 50% equity in the home because home values fluctuate. If the property’s value drops before the bridge finance receives approval, it puts the applicant in a compromised position.
Bridge loans help homeowners who have paid down a significant portion of their current mortgage. The lower the outstanding mortgage, the higher their home equity. Based on the client’s financial situation, it’s still possible to obtain the bridge loan. Some homeowners use debt in a savvy manner to leverage a better financial position. For homeowners who are simply looking for a solution to help them balance two mortgages, Mortgage Street finds viable solutions. Our loan specialists use our innovative tools to find the best financial product and terms.
Bridging Loan and Home Equity Conclusion
Home equity plays a role in whether or not the applicant will qualify for the short-term financial solution. Bridging finance includes several moving parts, so a lender takes a conservative approach. Most clients successfully receive and pay back the additional debt. It’s still a good idea for mortgage brokers to guide their clients. Mortgage Street loan specialists assist with running the numbers and education.