Bridging loans are a short-term funding option secured against a property, usually residential but they can also be taken out on a commercial property. They are used to bridge the gap between the purchase and either sale or remortgage of a property.
They can also be used as a short to medium term loan until you can repay the debt.
Also after the banking crisis more and more property developers started to use them as funding was not available from the high street banks.
What LTV can I get ?
Bridging Loans can be arranged up to 100% with additional security, and also on a First, Second or Third charge basis.
How do Bridging loans work.
Bridging loans can help you complete the purchase of a property before selling your existing one by offering you short-term access to funds, for anything from 1 to12 months.
Bridging Finance can also be used if you are property trading I.E you can make a quick purchase of the property before arranging a traditional mortgage after 6 months or simply sell the property on.
Auction purchase Bridging loans are also often used when making an auction property purchase before arranging a mortgage these are available for both commercial and residential.
Development and Refurbishment Bridging loans, are now widely used by both new and experienced developers alike. After the financial crash of 2008 the high street lenders virtually pulled out of the property development market, the slack was quickly taken up by bridging loan lenders, although significantly more expensive than traditional development loans, bridging loans allowed developers to continue building and refurbishing properties.
However, rates can be high compared to High Street lenders and there can be arrangement fees of up to 2%. However Property developers soon started to factor the costs into the scheme and a whole new market sector has been created.
With residential bridging for home sellers, the extra cost over traditional lenders can be absorbed partially by the fact that they become in effect a cash buyer or they can make a purchase that they may otherwise have missed out on.
With all bridging loans you will need a clear exit strategy, which the lender will be comfortable with.
Crucially, if you've not used this type of finance before you need to tread carefully and take professional advice, also if you intend to move into the property at any point then it becomes a regulated loan and you will need to appoint an FCA advisor in order deal with the loan for you. If you are not moving in to the property then this is not necessary as it is deemed a purely commercial transaction.
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