Guide to Getting Bridging Finance

Richard Butler Creagh

Guide to Getting Bridging Finance

Bridging loans, as the name implies, are short-term financial support that a bank or financial institution grants to a borrower as a means to bridge a present monetary gap especially when you are in between property transactions. The loan is designed to help fulfil the financial need of a buyer to complete the purchase of a property before he will proceed the sale of an already existing one.

Understand bridging finance

This short-term finance is often issued where a property is used to secure it and is meant to help bridge the financial gap. There are a lot of people that plan on selling their homes but would prefer not to let go of it yet until such time as they have found the perfect house that they want. Since this would mean that you will have to deal with two mortgages, the bridging finance can be used to ensure that you are able to pay the monthly dues.

Use it right

Bridging loans are quite versatile. They are most useful in being a solution to many circumstances. This includes chain-breaks, buying a property at an auction, as well as funding for a property purchase or other necessary refurbishments. It can also be taken advantage of by businesses in order to secure a business deal or to raise capital.

Have an exit plan

One needs to remember that while bridging loan is quite handy, it is not one designed to be used for a long time. Since there is only a limited amount of time that a borrower is allowed to use it and then pay it back, it is important to have an exit route planned ahead of time. This can involve using traditional mortgage to cover the payment, selling the property, or taking advantage of a mortgage for a buy-to-let investment.

Know the process

Every lender has his very own processes and steps that borrowers need to go through in order to take advantage of the loan. Generally, after the application has been submitted, the borrower will be issued indicative terms. Some lenders may be able to get this done within a matter of hours.

Valuation will follow along with the necessary legalities. This is where the lender will instruct the security for the loan to be assessed and to make sure that the legal matters are properly sorted. Borrowers can take advantage of a solicitor that specialises in bridging finance to help speed up the process. The fund will then be released once the application has been reviewed and all of the legalities have been fulfilled. It usually takes between 5 to 14 days for the funds to be released.

Know the costs

Costs will have to depend on the circumstances of the borrower as well as the terms of the loan. One also needs to factor in additional costs such as legal fees, arrangement fees, valuations, and surveys to the overall costs.

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