A bridging loan is generally used at times when you need a large sum of money quickly. They are seen as a short term finance solution and will normally be paid back over a relatively short period of time of up to a year. There a number of types of bridging loans available and the main reasons for you being likely to need one are for times when there is a property you wish to purchase but where you have not yet completed on your current home and therefore need to find finances to fund this. If you decided to purchase a property at auction then you may also find that bridging finance could be useful for you. Loans can be obtained for commercial, residential or land purchase and are available as open or closed finance, depending on whether you set a date for repayment or not.
The amount that you can borrow can range drastically, depending upon your needs and the company or broker that you choose to go with. If you are wondering how a bridging loan works then you will be interested to know that the loan is secured on either property or land and in the main you can borrow a percentage of the market value of the property.
Before the credit crunch, it was possible for you to be able borrow up to 100% of the market value if you had other properties that you can use as a form of security on the loan. However, the amount hat you can borrow now will be a lot less.
You will also find that bridging loans are more expensive than other types of loan since there are more risks involved for the lender and due to the high interest rates and various fees. Bridging loans are relatively straightforward to arrange; can be completed online; and can be arranged quickly and often with little documentation. Bridging finance on an auction property can be arranged in days and the decision is often made within hours of making the initial inquiry.
Residential bridging finance is incredibly useful when you would like to purchase a new property but your finances are still tied up in your existing property and you have not yet completed. A residential bridging loan can also be used to repay debt, purchase new investment properties and to fund home improvements. Bridging finance for renovation is also very useful in the situation where a high street lender cannot lend on a property because it is uninhabitable.
If you have a commercial property and need to release funds quickly then commercial property bridging finance could be a solution for you. It is particularly useful if you wanted to turn a commercial property into residential flats as this type of loan will be able to provide the funds for renovation. They can also be used for releasing equity for debt consolidation, business cash flow injection and building improvement or to purchase more new properties.
Developers and private builders can obtain land bridging loans which will help make the development progress quickly once the site that and permissions have been obtained. A standard mortgage can then be used to repay the loan once the development has been successfully completed.
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