"Bridge over Troubled Water" Simon & Garfunkel
Globally, but especially in the main overseas investor markets like the US, UK, Canada, and Australia, the housing market has seen intense competition, massive price surges, and dwindling inventory since 2020 - but if you're a real estate investor, all of that may be about to change, and for the better.
Using the US as a reference, mortgage rates are rising. In mid-June of 2022, the 30-year fixed-rate mortgage averaged 5.81%. That may seem high; however, rates now are where they were right after the financial crisis of 2008 when many people were actively trying to obtain a mortgage.
What makes this type of market great for real estate investors?
These higher rates make it more difficult for would-be home buyers to afford new homes. It's not that people are trying to buy extravagant houses, but that a modest home with an increase of $50 a month in mortgage payments could be the difference between buying or renting.
These higher costs are putting pressure on the housing market. It has already led to a decrease in mortgage applications to purchase and refinance for owner-occupied property, but an increase in investor mortgage applications getting in on high rental prices, demand, and lack of available rentals.
What once was a seller's market is shifting slightly, causing properties to stay on the market longer. This has resulted in liquidity issues for investors looking to sell their properties quickly to buy additional properties.
Luckily, there is a relatively simple and easy financing solution - GMG bridge loans.
What is a Bridging Loan?
Investors use real estate bridge loans as a short-term financing tool to bridge gaps in financing. For example, an investor might take out a bridge loan against a property they are selling in order to purchase or act on another investment property immediately.
In this case, the homeowner may need the money before their property sells. They can now use a GMG Bridge loan to extract equity today while waiting for the right price to sell.
Bridge loans can be secured quickly, often closing within a week to 10 days, and with little paperwork, because lenders are more interested in the collateral (i.e., a house) than a credit score or cash flow.
We offer Bridging Loans in: USA, UK, Canada, Australia, Singapore, Hong Kong, and Thailand.
How to use Bridging Loans to free up liquidity
Bridge loans allow investors to quickly free up liquidity using their real estate assets as collateral. This is a quick asset-backed mortgage where your financials or credit are not the primary underwriting criteria; the asset is. In order to better understand how this works, let's take a look at two examples;
1. Waiting for a property to sell at the right price:
You're selling a property but waiting for the right price. Another investment property becomes available that is too good to pass up, but you won't have the available funds until after you sell the existing property. No problem. Extract the equity from the property you're selling. Take advantage of the new investment. Wait for your property to sell and pay off the bridge. It's that easy and quick!
2. Financial strain:
Often, unpredictable circumstances can impact our financial position. The equity in your property can be the perfect way to ride out the storm without worrying if you'll qualify for a "conventional" mortgage loan. It is easy, quick, and straightforward to release up to 70% equity from your property based on the asset value alone. We can also structure these loans to where you do not have to make any monthly debt servicing for up to 12 months. This allows you to get the liquidity you need and then relax, reset and focus on your situation at hand.
When do Bridging Loans benefit investors?
As explained above, bridge loans are a great way to free up liquidity. A bridge loan may also be a good fit for you if you:
- Need to free up liquidity in a fast-moving market
- Can't afford to take out a mortgage on a new property without selling your other property.
- Need to secure funds to acquire or renovate real estate quickly.
- Already purchased a property, but you can't sell your current property quickly enough.
- Financial strain where conventional financing won't work or is difficult to obtain.
The housing market is evolving rapidly. Investors would be wise to understand their options so that they are able to adapt, take advantage of opportunities, and free up liquidity when they need it.
As a company, we only focus on non-resident mortgages for major international real estate investor markets: USA, UK, Canada, Australia, Singapore, Hong Kong, and Thailand.
In the US, our wholly-owned subsidiary, America Mortgages, is the only US mortgage specialist outside the US.
Get in touch with us today to learn more about the structures and options of short-term bridge financing solutions at [email protected].