bridging loan eligibility

Whilst researching your financial options for refurbishing that new property or purchasing a building at auction, you may have come across the term ‘bridging finance’ but what exactly is bridging finance and who is eligible for it?

What is a Bridging Loan?

A bridging loan is a quick short term finance solution for purchasing or renovating land, residential and commercial properties.

It is used to ‘bridge’ the gap between debts that are due and a line or credit becoming available. This is mainly seen when purchasing a property if a mortgage isn’t approved immediately. A Bridging loan facilitates purchases!

Who is Eligible for Bridging Finance?

Generally bridging loans are aimed at landlords and amateur property developers however it is more the situation than the buyer itself that a lender will focus on.

Here are a few reasons why a person may require bridging finance:

•    A Fast Property Purchase Bridging finance is highly popular amongst those looking to purchase a property quickly. In most cases bridging funds can be made available within a week, much quicker than a mortgage takes to process. A purchase is made using this cash loan, and long term finance is found in due course. With terms from 1 day to 3 years, this loan can be personalised to what suits your financial predicament.

•    Property Refurbishment If a property has no kitchen, bathroom or needs complete refurbishment it can be hard to get a mortgage. In the past many have resorted to putting a 100% retention on a mortgage, but it is now possible to apply for bridging finance and then refinance on to a long term option. These loans are very secure and therefore can be extended in order to cover the costs of refurbishment if needed.

•    Breaking the Chain When you are looking to move properties one of the main things that may hold you back is the inability to sell your property. This can be highly annoying if you have already found somewhere you’d like to purchase. This is where bridging finance comes in – a loan will be granted and secured against the property you wish to sell in order for you to transfer your mortgage to the new property. When the property sells you simply redeem the loan. This is a handy way of breaking those pesky property chains.

•    Auction Purchases When purchasing at auction it is important to have the appropriate funds secured before raising your number paddle. Most auctions will allow 4 weeks, post bid, to complete, meaning a bridging loan can be used during these 4 weeks whilst long term finance is secured.

•    Quick Cash If you are selling or refinancing a property then you may not be able to access these funds. A bridging loan can be used in a commercial sense to pay essential payments such as tax and VAT, support the business in a temporary cash flow shortfall or to help fund business requirements such as replenishing stock or covering marketing costs. This is one of the most detailed and varied uses of bridging finance so it is important you discuss this in depth with your commercial broker.

 

Do you fall into one of the above categories? If you do and you think bridging finance might be beneficial for you, give us a call so that we can discuss your options further.

 

bridging finance

 

Read more:

Everything You’ll Need to Get a Bridging Loan 

What Can a Bridging Loan Be Used For? 

Your Complete Guide to Bridging Finance for Land