A bridging agreement is a legal document that outlines the terms and conditions of a short-term loan and is commonly used in the real estate industry. It is a temporary arrangement that allows the borrower to access funds quickly, typically in a matter of days.
The purpose of a bridging agreement is to provide financing for a property purchase before the buyer has sold their existing property or obtained other long-term financing. This allows the buyer to secure the new property before it is sold to someone else. Bridging agreements are commonly used in the case of property auctions, where the buyer needs to have financing in place before the auction takes place.
The terms of a bridging agreement can vary depending on the lender and the borrower`s needs. Typically, the loan period is short-term, lasting between 30 and 180 days. The interest rates on bridging loans are generally higher than standard loans due to the increased risk involved.
The borrower will be required to provide collateral for the loan, typically in the form of a property. The lender will also assess the borrower`s financial situation to determine their ability to repay the loan. The lender may also require the borrower to have a plan in place for repaying the loan.
Bridging agreements are a useful tool for those who need to access short-term financing quickly. However, they should be approached with caution as they can be expensive and the terms and conditions can be complex. Borrowers should ensure they fully understand the terms of the agreement and are confident they will be able to repay the loan on time.
In summary, a bridging agreement is a temporary loan that allows the borrower to access funds quickly to secure a property. It is a useful tool in the real estate industry, but borrowers should approach it with caution and ensure they fully understand the terms and conditions before signing the agreement.