Bridging Finance Explained
Bridging finance is classed as a shorter-term loan utilsed to bridge the gap between say a purchase and a sale, or between a short-term financial need and a long-term funding solution.
Typically used for a variety of property requirements such as, purchasing a new home before selling the old one, or securing an investment property swiftly.
Key outlines of bridging finance:
Shorter-term:
Bridging finance is designed for shorter periods between 3-12 months or a longer term up to 18-24 months.
Secured:
They are typically secured against an asset, residential property or commercial or even a mixture of the two.
Swiftness:
Bridging loans can be arranged quickly, often within days, making them suitable for situations where speed is essential.
Higher interest rates:
Due to the shorter-term and risk involved, bridging loans often have higher interest rates than traditional mortgages.
Common uses of bridging finance:
Purchasing a new property before selling the old one:
This allows buyers to secure their desired property without waiting for their current home to sell which will mean you will require a regulated adviser to assist you in this situation.
Buying a property at an auction:
Auction purchases require funds within a 28 days period from when you put down the 10% on the day of the auction and bridging finance can provide the necessary capital to complete your purchase within that time frame. Good auction houses will allow you an extra 10 days over the 28 day noted period
Refurbishing a property:
Bridging loans can provide the funds to renovate a property, which can then be used to secure a traditional mortgage or sell on for a nice profit.
Investment opportunities:
Bridging finance can assist investors in taking advantage of opportunities that present themselves and require swift funding.
Important considerations:
Your exit strategy:
A clear plan for repaying the bridging finance loan either through the sale of another property or refinancing is essential and the funder will require to be informed at outset what the exit will be.
Interest rates and fees
Bridging finance loans can be more expensive than other financing options with higher interest rates and arrangement fees due to the shorter terms although, compared to a 25 year mortgage term it fades into comparison.
Conclusion –
Bridging finance is an ideal funding tool to have access dependant on your property requirements.
Ask for Mark when calling.