There are many benefits of Bridging loans compared to other kinds of financing. When financing is needed only for a short duration, they are often the lowest cost option to raise the funds needed. They are also quick to set up, and with flexible lending criteria, which means that approvals can be granted quickly and without lengthy checks and can be secured on any type of property, even one which isn’t suitable for other lenders.
What are the bridging loans that can be utilized to accomplish?
The use of bridge loans is for many different motives
A place to be maintained in a chain of sale
When a purchase of property is funded by the proceeds from the sale of a different property, and the sale is not completed prior to or even at the same time as the purchase, short-term financing may be required to fill in the gap, so that the purchase could be completed. The bridge will only last until the sale is completed, and then the proceeds will be used to repay the bridge. This is a common application of bridging loans, and is usually thought of as the sole reason to use one. But there are numerous other reasons!
Properties that are not fully completed Loans or Refurbishment Finance Renovating, converting or restoring homes
A lot of times, a property is thought not suitable to be mortgaged. This usually happens because it is in poor condition or, for residential properties or buy to let mortgages, it could be because the house isn’t equipped with a bathroom or kitchen. Bridging finance is secured against properties which other lenders think to be insufficient. This is extremely beneficial for landlords and property developers who are looking to purchase the property to refurbish and sell it later, or refinance it with a buy-to-let mortgage and then let out to tenants.
We are specialists in making arrangements for new bridging services to take over loans that are over or are coming to the expiration date. Facilities are arranged to replace existing facilities by an alternative that is less expensive as well as to extend the loan’s term or to let more money out. The fact that a term is not met on a bridge loan typically means that something is wrong, and could be costly.
Residential Bridging – downsizing as well as upsizing financing for UK and foreign property purchases
Many of our customers contact us to get bridging financing when they find a property that they want to buy without waiting for someone else to purchase an existing property. Bridging finance allows them to proceed with their plans and repay the loan in the event that the sale does take place.
Auctions are a great way to purchase a property
If you are the winner at auction , a typically deposit of 10% is made on the same day. The remainder of the purchase price must be paid to be paid within 28 days. It is possible to get it shorter! We recommend you read our guide to auctions for more details on buying property through auction. Bridging loans are utilized to purchase auction properties due to their ability to be set up in a short time, ensuring that purchases are completed within the timeframe required.
Quick purchases are ideal in the event that a bargain home or any other item that must be purchased is available
In order to secure the acquisition of an unbeatable deal, it will require a quick completion. There may not be enough funds to finance the purchase since capital is usually held in a property or other asset. A bridging loan could be quickly arranged, and secured against equity available in the property. The bargain item could be sold at a rapid gain and the bridging loan can be repaid. Alternatively, the item could be kept, or a better long term financing option could be set up to pay off the bridge.
Solutions for short-term cash flow issues
Problems with cash flow can occur from a variety of causes in the running of an enterprise. For instance, a bank might request an overdraft facility and customers might be late making payments on their invoices due to seasonality or a new equipment might need to be purchased unexpectedly.
The money are available to help you start any new business provided you have a viable way to exit to pay the loan.
Tax issues related to inheritance and probate
Sometimes, money is required in the case of inheritance or probate issues. The reasons are numerous to do this, such as the need to clear costs on property as well as pay tax and other charges and to repay other beneficiaries.
Buy a house below the market value
A lot of bridging lenders lend against the market value of the property, not against the purchase price. This can be beneficial when purchasing properties that are selling at less than the market value for reasons that are legitimate!
Prevention of repossession
If a home is due to be repossed, A bridging loan may be used to settle the debt and stop repossession. This allows the owner to remain in control of the property, so that they are able to sell it according to their own terms and stay clear of a forced sale.
Property development , which includes changing the use of the property
Bridging loans are a way to raise the money needed to finance the construction of a property.
A property can be purchased using a short-term lease
The purchase of a home with a short lease term could be a challenge for many lenders, which is why the bridging loan could allow you to buy the property and cover the cost of settling the lease so that you can qualify for an traditional mortgage.
Tax bill payment
Bridging loans are able to be arranged quickly, and could be an option to pay off tax bills and get rid of penalties.
The funds can be used to settle a divorce when there is a requirement to speed up the process.
What are the benefits of the bridging loan?
Quick to organize
When a financial institution is needed to obtain a substantial amount of money, this can be accomplished by using the business loan or a residential, commercial or even a but-to-let mortgage. These types of loans could require weeks or even months to set up. We can make quick Bridging loans, which means the funds could be on your account in just 48 hours.
Flexible lending criteria
There are numerous Bridging loan companies that all have their own distinct lending requirements. In general, bridging lenders aren’t focused on affordability, income and credit histories. However, they do want to know the value of the property that is being used as security and the way to exit. This is the way in that the loan will to be paid back before or at the conclusion of the loan.
Any type of property are able to be used to secure property
A bridging loan may be secured against flats, houses or maisonettes, shops mixed-use properties commercial buildings, offices as well as care homes or leisure facilities farmlands, development land, and building plots. The property can be leasehold or freehold, even if the leasehold lease has only the remaining time of its expire.
You could even apply for the property being offered for sale, which isn’t acceptable to other lenders.
property that is in poor repair
The property being used as security could be in poor shape or abandoned, or in dire need of significant renovation. Bridging loans are typically used to raise money in cases where an asset that is secured not acceptable to mortgage lenders.
Non-standard construction of properties
A lot of mortgage companies will only lend to properties that are classified as typical construction. Bridging loans are secured against properties that are not typical or unique construction.
Multiple properties can be used to provide security
A bridging finance facility may utilize some or all of the properties as security. It could be on a first – or second- fee basis or even a combination of both! For instance, in the case of buying a house, the purchase price in full may require raising. Thus a bridging loan can be made by means of one fee on the home that is to be purchased , as well as a charge for a different property with an outstanding mortgage but with equity.
Any kind of loan
Traditional lenders typically only permit borrowing for specific reasons and often don’t offer any room for flexibility. Bridging lenders don’t mind what you plan to use the funds for as they can show that you’ll be able to pay back.
Put you in a in negotiating for a purchase
A deal from a cash-paying buyer is more appealing to sellers than one who is forced to sell their home first. It is also possible to use this to negotiate a lower price.
What are the drawbacks of the bridging loan?
Bridging loans are designed to be a short-term alternative to finance.
Their interest rate per month is very high when compared to other financing options therefore, they shouldn’t be considered for long-term purposes. It is vital to establish a plan of exit since at the end of the term agreed upon, the bridging loan needs to be paid back.
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