Bridging Finance is short term funding
Bridging finance is secured against property (or land), which can be used for a number of reasons until either longer-term finance can be arranged or the property is sold in order to repay the loan.
There are many circumstances when bridging finance can be used to assist clients, but the main purposes are as follows:
Refurbishment of a property
This can include properties that are deemed not suitable security in their current condition by high street lenders and will have an enhanced value once the works have been completed.
Conversion of a property
This can include converting properties to or from, one use to another. This covers a multitude of possibilities, offices to residential, a house into multiple flats, multiple flats back into a single dwelling, public house to residential etc. Often these are purchased both with and without planning permission. The latter creates additional issues.
This occurs when a buyer has found a new property but needs to complete quickly or face losing it, because the vendor does not wish to be involved with a chain. Alternatively clients may not want the added pressure of selling, at the same time as buying, or simply do not have time to sell their current home.
Also, a client may have lost the buyer for their existing property and time does not allow a new one to be found. In this instance, rather than waiting until a new buyer comes forward for the existing property and risk losing the new home, a bridging loan may be a suitable short term alternative.
Below Market Value Purchase (Discounted Purchase)
This is where a buyer has negotiated a purchase price well below the properties current value. Subject to the value of the property being confirmed it is possible to arrange a bridging loan that is based on the current value of the property and not the actual purchase price.
This means that the discounted purchase price can reduce the amount of cash deposit required. This type of loan is typically repaid via a remortgage or subsequent sale of property. Please note that difficulties can be experienced if re-mortgaging within the first 6 months of ownership, but it is still possible.
It should always be noted that given the nature of bridging funding, it is more expensive than a standard mortgage and should be considered only as a short-term funding option. It is also essential to establish the exit strategy at the point of application to ensure the loan can be repaid.
We can refer you to a master broker for bridging finance needs. Contact us for more information on 020 8441 2605 or 01442 232 272, alternatively click here for our enquiry form.