What is Bridging Finance and What are its Best Uses?
When consumers are looking for an alternative from traditional, long-term financing, bridging finance and loans may be viable solution. Traditional mortgages and other loan types generally carry long, strict repayment terms that do not offer the borrower much flexibility. Bridging loans, however, can be arranged quickly for a number of different purchases and often offer shorter, more flexible repayment plans. When you are in need of covering a financial gap, bridging finance may be the answer.
Auction Purchases are Possible Using Bridging Loans
One of the most popular uses for bridging finance is purchasing property at auction. The key to be successful in this situation is having the confidence the funding that is needed will be available come auction day. Since large bridging loans can be arranged quickly – usually within seven working days – this allows auction goers to have the confidence they need to make a purchase and be able to pay for the initial cost and remainder of the purchase price in a reasonable amount of time.
Complete Transactions Quickly with Bridging Finance
Property developers and investors have been utilizing bridging finance more frequently to help them complete transactions quicker. In many situations, the speed in which bridging loans can be made available allows borrowers to be viewed as “cash buyers,” allowing them the opportunity to take advantage of quick sales and better deals on properties and other purchases. Terms of bridging finance can vary depending on the situation – repayment terms can range from a single day to up to a year.
Bridging Loans can Help Complete Refurbishments
More often than not, when properties or homes are purchased via quick sale or auction, they need some renovation or repair work done before they can be sold or rented. Lenders who offer traditional mortgages will generally not approve a mortgage on a home that is not livable, meaning the property developer will need to raise funds in order to renovate the home. Bridging finance is a great option for this situation as it can help to fund the project while longer term financing is being put into place.
Chain Braking using Bridging Loans
If an individual is having a hard time selling his or her current property, but wishes to purchase or move to a new property, bridging loans can be used to finance the transition while the original property is being sold. This allows applicants a longer amount of time to move their residential mortgage from the old property to the new property and can also help to finance the move before the old property is sold. Bridging finance can also be used to release equity that is tied up in the borrower’s home.