Bridging finance is a specialist type of finance that is usually used to bridge the gap between when you buy property and when your funds come in. Bridging loans are short term loans of between 1 to 36 months, typically 12 months.
At Bridging Finance Specialist, we can arrange you bridging loan at no cost to you. We also provide free bridging loan advice and guide you through the entire process of your bridging loan application.
Why would you choose a bridging loan?
Less strict lending criteria: Unlike high street lenders, bridging lenders do not always ask for proof of income and they will also lend against properties in poor state of repair.
Loans are processed within a short time: Bridging loans can be put in place within a short time, which is ideal when you are strapped for time.
Comparatively cheaper than other options: High street loans can appear cheaper because they have lower interest rates, but the costs of arrangement fees and early redemption charges add up, making them expensive for the short term. This is where bridging finance comes in, because the lower set up costs mean that it is actually cheaper.
What are the different exit strategies you can adopt when you redeem your bridging loan?
When you apply for a bridging loan, the lenders will want to know how you plan to repay the loan at the end of term. This is known as the exit strategy.
Lenders put a lot of emphasis on the exit strategy because bridging loans are not designed to be long term options and therefore need to be paid back within the stipulated time. Also, most lenders will charge you renewal fees if you exceed the term of loan and then it becomes expensive.
We have put together a guide detailing several types of exit strategies. Once you read our guide, you will know which exit strategy will suit you best.
The commonest exit strategy is to sell the security property to redeem the bridging loan.
If you decide to adopt this exit strategy, then be sure to research and estimate how much your property will sell for and whether this amount will be enough to pay off your loan.
Re-mortgaging the property is also a popular option of paying off the bridging loan. This is usually done if the bridging loan was used to restore or renovate the property.
What is the 6-month rule and how will it affect your bridging loan?
A large number of high street lenders have a ‘6-month rule’ which means that they do not lend against a property if it has been owned by the proposed borrower for less than 6 months. Some lenders even ask for a minimum ownership of 12 months.
If you plan to redeem your bridging loan by refinancing it through a re-mortgage from a high street lender, you will need to keep the 6-month rule in mind.
Are there any loan options other than bridging finance?
Bridging loans are popular because of the speed with which these loans can be obtained.
That being said, we can help you to buy a property using a buy to let mortgage within the short space of 2 weeks! Call us to discuss options to suit your unique needs.
If you own a business and have cash flow troubles, you can take out a commercial bridging loan. You can then repay this loan at the end of term through asset refinancing or money that comes in from outstanding invoices.
You could also consider development finance, secured loans and asset loans as alternatives to bridging loans.
Advice for arranging finance to buy at auction
When thinking about buying at auction, it is best to have your funds in place, because you will need to complete your auction purchase within 28 days. There is also the 10% down payment to consider.
Besides arranging the finance for your auction purchase, you should also view the property you intend to buy and also have a conveyancing solicitor look over the legal pack and check it for special conditions or provisions.