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:
1. 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.
2. 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.
3. Chain breaking
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.