BRIDGING
FINANCE is simply a short term mortgage loan
that is secured against property.
BRIDGING FINANCE is very flexible and;
- can
run for any short length of time, although this
usually ranges from one day to one year at most.
- is
mainly used as a stop gap when funds are required
quickly.
- is
very useful for raising funds while waiting to
secure a longer term mortgage or loan.
- can
cover shortfalls between buying one property and
selling another.
- can
be used to purchase property at AUCTION.
- can
be used to fund the deposit required for the mortgage
to complete.
BRIDGING
FINANCE is not limited to just purchasing property
and can also be used for;
- Land
purchase
- Development
finance for building property
- Overseas
Property purchase for commercial, residential
and holiday properties
- Business
capital finance
- Holidays
& weddings or the dream of a lifetime
- Cashflow
when cash is needed urgently for whatever reason
Many
property purchasing BRIDGING FINANCE loans are only
for one day.
Until as recently as early 2008, Investors were able
to arrange a BRIDGING
LOAN to purchase the property outright
for cash and arrange a remortgage to pay off the BRIDGING
LOAN the same day. The major advantages of
this arrangement are the speed at which purchases
can be completed and the ability for creative financing
to be employed
Other
short-term BRIDGING LOANS will usually
provide a three month facility, with the terms being
flexible. If the facility runs over into a longer
period, heavy penalties are often applied.
BRIDGING
FINANCE is traditionally considered an expensive option,
however, it is not necessarily so and the convenience
can far outweigh the cost implications.
A one day BRIDGING LOAN will incur
a set charge based either on a fixed fee or on a percentage
of the amount loaned.
Short
term BRIDGING LOANS up to 12 months,
will have an arrangement fee of 1%+ of the money funded.
They will also incur monthly interest and are charged
at a percentage of the amount loaned per month. This
typically ranges from 1% to 3% per month above Bank
of England base rate or LIBOR.
BRIDGING
FINANCE Companies will offer a variety of
payment options that clients can choose depending
on which option best suits their requirements and
circumstances including normal monthly payments, deferred
payments, roll-up and part payments.
Using
BRIDGING FINANCE to purchase property
at AUCTION
is a popular method. Speed is important in all types
of Bridging Loans, however with a property AUCTION,
the timing of finance is crucial due to very short
time scales being imposed. A loan can be agreed based
only on the property’s valuation not on the
purchase price. This would usually be for up to 75%
of the market value so in some cases, this could mean
funding of up to 100% of the actual purchase price. |
