Bridging Loans explained

UK Bridging loans Explained

Other uses of Bridging Loans:

• Use a bridging loan for Probate cases - to pay the Inheritance Tax owed on an estate, following which the estate property can be sold.
• Use a bridging loan for Divorces - to release equity in the family home to allow a partner to buy a new home pending the sale of the existing home.
• Use a bridging loan for Downsizing - mature borrowers may be downsizing and need to complete on their new smaller dream home before their current home is sold.
• Use a bridging loan for Auction purchases - to enable investors to purchase at auction and because of the speed of bridging, to regard themselves as cash purchasers - even attempting to acquire properties before the auction.
• Use a bridging loan for Capital raising - to assist with the completion of a purchase before other "locked up" funds become available.
• Use a bridging loan for Buy to let - bridging provides an opportunity to snap up properties and arrange long term financing later.

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Please Note: Bridging Finance / Commercial Mortgages are NOT regulated by the Financial Services Authority as they are regarded as a commercial investment transaction.

Bridging Finance UK continued..

Commercial bridging finance is a loan, or short-term mortgage, usually for a period of 12 months or less, which may be used towards the purchase of a property, to consolidate debts or to resolve a temporary cash flow situation within a commercially operated business. The loan or short-term commercial mortgage is secured against existing property.

 

Why use Bridging finance?

1. Tight deadline- Most auction houses have tight deadlines for completion and in the current market these are very difficult to achieve using a traditional Buy to Let Mortgage. Our lenders provide funding within 7 to 10 days giving you peace of mind. For further assurance we can conduct a valuation before the auction and provide indicative terms, so you can go to auction knowing exactly how much you can bid and how much the funding will need.

2. Property un-mortgageable in its current state- Often properties at auction are in need of works or refurbishment. Having no kitchen or bathroom for example can mean that traditional Buy to Let lenders will not lend on a property or will ask for a significant retention of funds. Our lenders will take a commercial view and, often lend without the retention. Our funding enables you to do the necessary refurbishment work, bringing the property up to the required standard needed for a Buy to Let refinance deal.

3. Add value before refinancing- For many investors, using bridging finance provides the best way to recoup deposit/refurbishment funds and therefore maximise return on investment. Bridging funds are used to purchase the property and then upgrade/refurbish giving an uplift in value. Upon revaluation you are able to re-finance against a higher value, which in most cases results in recouping all of the deposit and refurbishment funds. Using a bridge means the purchasers funds are “tied in” for a very short period of time, cash flow is maximised.

4. Credit repair- In the current market a poor/adverse credit profile will make obtaining a mortgage very difficult and/or extremely expensive. A bridging loan of between 6 -9 months will give you the opportunity to repair your credit file before re-financing into a long term mortgage at a more competitive rate.

5. Buying a property to sell quickly- When an investor is buying a property to sell quickly (flip on) the fees associated with a mortgage (set up, Interest, ERC) can outweigh the costs of a bridge. Some of our lenders have no minimum term enabling you to sell quickly without paying further interest.

6. Sales under Value- In the current market many purchasers/investors are buying property below market value. Our lenders will take a commercial view and in certain circumstances lend against the “Open Market Value” of the property. By lending against the open market value, the deposit needed by you is reduced again easing cash flow therefore increasing your return on investment and making the auction purchase achievable.

 

Bridging finance Explained more ...

A bridging loan is a short-term loan secured against a freehold or long-leasehold property allowing business people and individuals to:

• Borrow money against market actual market value of a property rather than a discounted purchase price.
• Purchase one property before completion on the sale of another
• Arrange temporary funding for the purchase of a an un-mortgagable property pending repairs.
• Fund the purchase of a property in need of refurbishment, with a view to resale on completion of the improvements. In these circumstances we can also arrange additional funds cover the cost of the works.
• Beat a deadline to buy a property, for example funding the urgent purchase of a property pending arrangement of a long-term mortgage. This can be particularly useful in auction situations
• Release cash quickly without being tied into a long-term mortgage
• Borrow short-term against the value of a property, not against income multiples.

The list is nearly endless, but the common denominator for those requiring bridging finance is that the loan is required at short notice.

Other uses of Bridging Loans:

Use a bridging loan for Probate cases

- to pay the Inheritance Tax owed on an estate, following which the estate property can be sold.

Use a bridging loan for Divorces

- to release equity in the family home to allow a partner to buy a new home pending the sale of the existing home.

Use a bridging loan for Downsizing

- mature borrowers may be downsizing and need to complete on their new smaller dream home before their current home is sold.

Use a bridging loan for Auction purchases

- to enable investors to purchase at auction and because of the speed of bridging, to regard themselves as cash purchasers - even attempting to acquire properties before the auction

Use a bridging loan for Capital raising

- to assist with the completion of a purchase before other "locked up" funds become available

Use a bridging loan for Buy to let

- bridging provides an opportunity to snap up properties and arrange long term financing later.

 

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