Eventually there comes an age where a person doesn’t want the stress of looking after their own home, which is when they and their family begin to look at places like nursing homes.
These places are created in order to give seniors a place where they can stay and be cared for. But how can a senior and their family pay for these places? This is where senior bridge loans come in. But what are those?
Well, we’ve got the answers for you. In our guide below, you’ll find out all about senior bridge loans, including information on just exactly what they are as well as how a person can qualify for one. Read on!
What Is A Senior Bridge Loan?
You may have an idea of what a senior bridge loan is already, because it’s what it sounds like! A senior bridge loan is a short-term loan that can be given out to families that need some financial help in order to put their senior members in an assisted living home.
Not everybody has the money to pay for the housing and care that their senior loved ones might need, so this loan helps them.
However, it is important to mention that senior bridge loans almost always have high interest rates attached to them. This means that not only will you have to pay back the loan in full, but additional amounts on top of that that grow over time.
Their rates are often identical to the “prime rate”, which is the interest rate that commercial banks charge their richer customers.
This means that senior bridge loans carry an interest rate higher than most. If you can’t afford the interest rates, then it’s not a good idea to take a senior bridge loan.
It must be said, though, that part of the reason that the interest rate is so high is because the loan is only short-term.
These loans only last between one and 18 months, depending on the contract. Sometimes the loan can be longer, though that’s rarer. This makes affording the interest rate slightly easier, because the loan isn’t too long lasting.
Types Of Senior Bridge Loans
There are two different types of senior bridge loans that you can get, each with their own benefits and downsides.
Open Senior Bridge Loan
These types have no fixed date for repayment, though they still will usually be offered under a timeframe of 12 to 18 months – during which they will be paid off.
These loans are usually taken up by families who are going to sell off their senior loved one’s home in order to get the money to pay off the loan – the loan that will be financing that senior member going into a care home.
However, although they often think that the home will be sold within that time frame, they are unsure of how much they might get from it.
For this reason, an open senior bridge loan has a very high interest rate, because the lenders are not sure how much the family is going to be making.
Closed Senior Bridge Loan
You can probably guess from the name that this is the opposite. This type of loan has a fixed and determined deadline for its repayment, which is agreed on by the family beforehand.
These loans are almost always much shorter, often just a few months. This is because the lenders have more confidence in how much money the family is going to have, and know that they can repay it promptly.
For this reason, the interest rates are lower than with open senior bridge loans. This makes the closed loan much more appealing to many families, because it’s only going to last a brief amount of time, and there will be less interest to incur.
Who Can Qualify For A Senior Bridge Loan?
Not everybody can secure a senior bridge loan, because there are a variety of areas that a family will need to succeed in first in order to get the confidence of the money lenders.
We’ve mentioned just earlier that some families sell off the home of their senior loved one, in order to pay off the loan that is taken up in order to put that senior member into an assisted living home.
When this is the case, the money lenders will have a look at the housing market. This is because they want to have an estimate of how quickly it will take for the house to be sold and, in turn, how quickly their loan will be paid off.
If it doesn’t look like the house is going to sell very soon, or that there’s uncertainty, then the lender might not grant a senior bridge loan.
Additionally, the lender examines the credit scores of the family. Not just the head members, either, but each member. This is because every member will be expected to help if the loan cannot be repaid.
If the collective credit score of the family is too low, then the lenders won’t feel confident that they’ll get their loan and its interest repaid, and will probably decline offering the senior bridge loan.
Paying It Off
On the whole, the loan should be paid off within the period of one to 18 months. It doesn’t have to be paid off in one go during that, the family can instead pay it in instalments if that’s easier.
They can use as much of the loan as they like to help put the senior member into an assisted living home.
Final Thoughts
If you need financial help putting a loved one into an assisted living home, a senior bridge loan can help you. However, make sure to keep their high interest rates in mind when making your decision.
