An Easy Guide To Short-Term Mortgages

A short-term mortgage loan is a type of funding alternative that is beneficial to overcome a temporary business cash flow shortage, they can be used for any business related purpose. It is a type of loan where you have to pay back the entire amount with interest by a given date, normally terms are 1 – 6 months. It is advantageous for start-up businesses and business owners who may not be eligible to obtain loans from a bank. It can effectively solve temporary and sudden cash flow issues.

Importance of short term Loans

But what is the importance of this loan type? Well, there are many reasons why people are opting for this funding option. The reasons are as follows:

• If you do not have a regular income or have bad credit, the traditional lenders do not approve mainstream funding. In such circumstances, short term mortgages enable you to get the capital, and you can use the money for any business related purpose.
• Thinking of expanding your business or purchasing some much needed equipment then this type of loan comes in handy as it allows you to obtain access to funds quickly and private funders can offer you a short-term term second mortgage.
• As all fees and interest are capitalised and repaid at the end of the loan this allows you time to improve and grow your business without having to worry about meeting monthly interest commitments.

Different types of short term mortgages

Short-term mortgage loans have different types, some of which are as follows.

1. Short term fixed-rate mortgage

Taking a short term loan with a fixed rate provides peace of mind that your repayments will not change for the term of the loan.

2. Short term interest-only mortgages

A short-term interest-only mortgage will enable you to pay the interest amount each month. The advantage of this is that the entire loan amount will not remain due until the end of the term. This funding can be easily worked into your cash flow.

Advantages of short term mortgages

In today’s uncertain economic world, securing a short-term mortgage is an option several business owners are taking advantage of. It has numerous advantages that people might be unaware of. These include the following:

• Flexibility

Loan terms for the short term mortgage loans are flexible and are designed to suit your needs. You can take a loan for as little as one month or structure the loan up to a 12 month term. The lenders meet your needs and ensure that you are taking a loan term that suits your business and exit strategy.

• Business Friendly

Small business owners take up  short term mortgage loans as they are designed for business use and as there are no repayments in some circumstances this is beneficial to businesses who have lumpy or seasonal cashflow.

• Savings

As the loans are only for a short period of time, there are savings in interest costs as the loans do not run for long terms such as 10 years. They are designed for a short term need and you require the ability to repay the loan in a short time frame.

How to acquire a short-term mortgage loan?

You can get the loan for your business if you meet the specific criteria of the lenders. The lenders will verify whether you can pay back the money or not, and they will also consider your exit strategy before they approve the funding. This type of funding is designed to be hassle free and easy to obtain.

Is short-term funding available for consumer purposes?

Short term funding is only for business use, the applicants must be running and operating a business, they are not designed for be used for any other purpose.

Wrapping It Up

Though this funding option is not suitable for everyone, it can be a lifesaver for businesses who need access to funds quickly, have equity in real estate and have a solid exit strategy for how the loan is going to be repaid.