What can I use Bridging Finance for?

Bridging loans can be utilized in a variety of situations to close a financial gap when funds are not immediately or readily available. We’ve covered a few common scenarios in which bridging finance can be applied.

Buying a Property at Auction

A mortgage may take longer than expected to process, therefore a bridging loan can be great if you need to borrow money immediately to secure a property you wish to buy at auction. After a bid on a property purchased at auction is accepted, the majority of bridging loans are extremely simple and quick to arrange. You can even have all of the paperwork and indicative conditions finalized before you find a specific house, which will speed up the process once you’ve placed an offer.

Purchasing Land

It is likely that you will need to locate finances quickly to purchase land at auction or to obtain short-term financing to build residential or commercial buildings. A bridge loan might be a useful intermediate alternative for purchasing land and financing construction until you can sell or obtain a mortgage.

Renovation

Bridging finance can be utilized to get the finances required to finish improvements. This can range from small bridging loans for minor modifications, such as plastering or replacing fixtures, to bigger bridging loans for substantial structural repairs. If you’re buying a house that isn’t mortgageable because it lacks a kitchen or a bathroom, bridging finance can assist in covering the costs of making the necessary repairs to make the property mortgageable.

Fixing a Broken Property Chain

If you’re in a property chain that falls through, bridging finance might help you acquire financing to keep your new home. Usually, bridging loans give you a period of 12 to 24 months to sell your previous property and fully repay the bridging loan.

Do I need a Bridging Finance broker, and what are the benefits of working with one?

Your individual circumstances and needs will determine whether or not you require the services of a bridging finance broker. However, there are other instances in which brokers can be highly useful.

Indeed, while looking for bridging finance, a broker may be able to connect you with lenders you were not previously aware of. A broker can also save you time as a borrower by executing the paperwork on your behalf.

Brokers can also offer expert advice on the appropriate lenders or financial products to meet your needs. They can negotiate loan terms on your behalf, potentially resulting in a better offer. (Especially if the broker has an excellent working connection with the lender or access to unique prices or items).

However, keep in mind that involving a broker may result in additional costs and charges. As a result, before making a selection, you should carefully analyze the expense of working with a broker and figure it into your budget.

Are there any disadvantages to working with a Bridging finance broker?

In reality, the disadvantages of working with a broker are difficult to measure, given the benefits they might provide in return.

For example, brokers frequently levy additional fees that might increase the cost of the bridging loan, while the borrower has no direct influence over the application process. This can result in delays or confusion. Brokers can help you access a wider selection of products, but they may only work with a few lenders.

However, if a broker can help you discover a good bargain with a reputable lender, the benefits may exceed the disadvantages. As always, it is up to you to decide what works best for your property investment goals.

What information does the broker need from me?

When you approach a bridging loan broker, they will usually ask a few questions. This will help them understand your needs and financial situation.

For example, brokers will inquire about the purpose of the loan. They will decide why you need bridging finance and how you intend to use the funds. They will also want to know how much you want to borrow and for how long.

If the bridging loan is secured against a property as collateral, brokers will inquire about the borrower’s ability to repay the loan. In many cases, this will include a credit check to establish your reliability and the interest rate that the lender would offer you.

Finally, brokers will want to check that you have an exit plan in place. So it’s evident you have a plan for repaying the debt.

Pros and Cons of Bridging Finance :

Before applying for bridging finance, you should analyse the pros and cons in order to determine whether bridging finance is the best option for you. Here are some of the major advantages and downsides.

Advantages:

• A bridge loan provides you with quick and easy access to a cash lump payment.
• Bridging finance allows you to invest in land or property that you would not otherwise be able to. This could be to buy land at auction, finance building projects, or renovate unmortgageable houses.
• Bridge loans might assist you bridge the gap if your property chain falls apart and you want to buy your new house before selling your old one.
• Bridging loans might be for huge quantities of money, depending on your individual circumstances. Keep in mind that your loan’s LTV (loan-to-value) is normally required to be 75% or less. Early repayment is usually not charged, but some bridging loans may.
• Open bridging finance provides more flexibility. With no specific repayment date, you won’t be pressured to sell at a certain point.

Disadvantages:

• You must ensure that you can afford it, just as you would with any mortgage or secured loan. If you miss repayments, you risk losing the property.
• Most bridge loans demand a personal guarantee, which means you are personally liable. If you default on the loan and there is a gap after selling your property, you may be forced to sell additional assets to make up the shortfall.
• Bridging Finance typically offers higher interest rates than normal mortgages. Typically, you’ll see an interest rate of 0.5% to 1.5% a month, which means you could pay roughly 6% to 18% interest per year, depending on your exact bridging finance deal.
• Some bridge loans are unregulated. While this can result in a speedy and flexible loan, unregulated loans provide less borrower protection. A bridging loan licensed by the Financial Conduct Authority provides more protection.
• Bridging finance comes with a variety of costs that can pile up quickly. Depending on your agreement, this may include fees for set up, appraisal, drawdown, and departure fees, as well as solicitor charges.

As expert brokers, we can assist you in securing bridging loan funds for both residential and commercial property deals within the UK.

At Bridging Finance, we work with experienced and established lenders who ensure your deal is structured correctly from the start and provide our expertise to ensure the deal works.

Start the process by submitting a free initial inquiry to us or call us on +44 011 63666339  to speak to one of our experts.