Are you in a situation where you need to secure a property quickly, but your funds are tied up elsewhere? There is a solution that could be right for you and it is called Bridging Finance. Let’s dive into what bridging finance is, explore its common uses, and discuss the pros and cons to help you make an informed decision about this financial tool.
Understanding Bridging Finance
So what is Bridging finance exactly? It is a short-term loan designed to “bridge the gap”. Typically lasting for 12-18 months, these loans are secured against property or another asset. This provides the lender with security.
Common Uses of Bridging Finance
Bridging finance is incredibly versatile and can be used in various scenarios:
- Property Chain Breaks:
Let’s imagine that you have found your dream home, but your existing property hasn’t sold yet. Bridging finance allows you to purchase the new property while waiting for your current one to sell.
- Property Auctions:
We all know that property auctions move fast, and sometimes you may need immediate funds to secure a winning bid. Bridging finance can provide the money for such opportunities.
- Property Development:
Bridging finance can also be used to fund works that need to be carried out on a property. Whether you’re renovating your property for resale or embarking on a larger development project.
The Pros of Bridging Finance
Using bridging finance has several advantages:
Bridging loans can provide quick access to funds. There are lenders out there that can complete within just 7 days from application which allows you to seize time-sensitive opportunities.
They can be used for various purposes, which makes them suitable for a wide range of property transactions.
- No Monthly Repayments:
The vast majority of lenders allow borrowers to roll up the interest and repay it at the end of the loan term, which helps reduce monthly financial strain.
The Cons of Bridging Finance
But as with all types of finance, there are some drawbacks to consider with Bridging Finance:
- High-Interest Rates:
Bridging finance often comes with higher interest rates compared to traditional loans. This can increase your overall borrowing costs.
- Short-Term Commitment:
You must have a clear way to pay back the loan from the very start. This is known as an exit strategy. You need to have this as these loans are short-term. Failing to repay on time could lead to financial complications.
- Risk of Property Repossession:
Defaulting on any mortgage comes with the risk of the lender taking possession of your property. The same applies to bridging loans as well, so it’s crucial to meet your obligations.
- Costs and Fees:
There are additional fees such as arrangement fees and legal costs, which are associated with bridging loans and can add to the expense.
How to Choose a Bridging Finance Provider
To make sure that you are getting the best advice around bridging finance you should seek advice from financial professionals who can guide you through the process.
At Quick Mortgages we offer fee-free advice and have access to all regulated and non-regulated bridging lenders, so we can make sure that you are getting the very best deal for what it is that you are trying to do.
Contact us today to discuss your unique requirements and learn more about how we can assist you in securing the funds you need for your property ventures.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.