Bridging finance, sometimes called high speed property finance, is really a’financial tool’used to improve funds against the worth of a property. These funds can be utilized for just about any legal purpose, maybe to purchase another property or to improve capital for some other reason. Bridging finance is primarily for short term purposes – typically one or two months but can be for approximately two years. Literally any residential or commercial property that has provable value can be used to secure a bridging loan.
A number of the main purposes to which bridging loans can be put:
1) Purchase of a residential or commercial property prior to the sale (or re-mortgage) of a current property.
2) Purchase of home where speed is essential to clinch the offer
3) Funding can be arranged for property in need of substantial repair or refurbishment pending a long term mortgage.
4) In order to avoid bankruptcy of other financial crisis by releasing the equity in a property.
Bridging loans can either be on the basis of the “restricted sale value” of a property or the Open Market Value (OMV). The difference is just down to the preference of a person lender; a specialist commercial broker will undoubtedly be well alert to the difference and should make sure that that is made clear to the client.
How can it work?
A professionally prepared valuation report could be the back-bone of a bridging loan. Most bridging loan applications undergo relatively few background checks on the client’s power to repay the loan, which means lender has to depend on the valuation due to their security. Most bridging lenders can have a preferred listing of surveyors so it is better to leave arranging the valuation to your broker.
Whilst waiting for the valuation report the lender will usually carry out their statutory checks on the applicant and prepare yourself to issue the formal offer documents or facility letter once the valuation has been completed.
Forms of Bridging Loan
Whilst researching bridging finance you will come over the terms “closed bridge” and “open bridge “.In principle a sealed bridge is where in fact the’exit route’or’repayment source’has already been arranged typically where contracts have already been exchanged however the funds are not likely bridging finance uk to become for sale in time. On the other hand, “an open bridging loan” means that there is not a confirmed repayment method. As with anything else financial, there’s a gray area between the two. The main things is to make sure you are arranging the proper finance for your circumstances. That is where a specialist bridging finance broker is better placed to assist.
Bridging Finance in the UK
These day there are more bridging finance lenders in the UK than there have ever been, so rates are coming down and terms are becoming more flexible. When dealing with a bridging finance broker do not forget of asking for the terms of the loan to be explained in plain English. You will often be quoted a broker fee and a lenders arrangement fee. The interest rates and any repayment charges must be explained at the outset bridging finance uk.