Bridging Loans
Bridging finance can be a really useful tool for property investors and developers. It can help people buy properties that are effectively not ‘mortgage-able’, where they’re marketed as ‘cash-buyer only’ properties and that might be because there’s an issue with the property – perhaps it’s in a bad state of repair – or it might just be a plot of land or property without planning consent that the buyer plans to do something with.
They can also use them to buy below market value and that means they can buy them quickly if a good opportunity comes up, rather than waiting for a mortgage to come through or another property to sell to release funds.
The great thing about bridging finance is it can be arranged in a very short space of time; it can be done within a few weeks. The quickest I’ve turned a complete case around from start to finish is four days, so it can be made available at very short notice. Speed is one of the reasons that people choose bridging finance, or it can be because they don’t have the funds available to buy a property: they’re waiting for something else to sell, they see a really good opportunity come up, and they therefore want to move on it without having to wait.
You need to make sure there’s a solid exit strategy in place. When a lender assesses an application – and even when a borrower looks at what the funds are for – there needs to be a clear plan: how is the bridging loan going to be repaid at the end of the term?
The term of the loan is usually 12 months. It can be longer – it can be 18 or 24 months – but there has to be a clear strategy that makes sense as to how the borrower is going to repay the loan. The main strategies we see are sale and refinance, so either the property is going to be renovated and then sold or it’s going to be refinanced with a buy-to-let mortgage, whether commercial or residential.
If you are interested in financing a property investment or would like to know more about how bridging loans work, please get in touch with Vintage Wealth Management today and our specialist advisers can provide all the guidance you need.
Joel Kersen
Head of Commercial Finance
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. THE FCA DOES NOT REGULATE SOME FORMS OF BUY TO LET MORTGAGES.
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