Bridging finance is a flexible, fast way to secure a ‘bridge’ between transactions and a longer-term funding solution – and it has many useful applications!
Suppose you need a short-term financing option without rigorous lending criteria. In that case, a bridge loan can be a beneficial way to purchase a property that may not have been eligible for the standard mortgage terms.
Today, the Revolution Brokers team explains some of the many uses of bridging finance to illustrate when you might find this type of loan advantageous.
For further information about applying for a bridge loan for any reason, please get in touch on 0330 304 3040 or via email at firstname.lastname@example.org.
Bridge Finance to Avoid Breaking a Chain
Most residential property purchases are part of a chain – each property needs to sell before the next home can complete.
Unfortunately, chains often break. That might be because:
- One buyer cannot secure a mortgage in time.
- A homeowner takes the property off of the market.
- Transactions stall due to survey issues.
Bridging finance broker can prevent any such delays or even losing out on a property altogether by providing the capital needed to complete your purchase without needing to wait for your existing home to sell.
Once that transaction is finalised, you can use the proceeds to repay the bridge or remortgage the balance onto a conventional mortgage at a lower interest rate.
Buying a Refurbishment Property With Bridging Finance
Properties in poor condition, requiring redevelopment or refurbishment, are often not eligible for a standard mortgage.
Residential homes and buy-to-let properties must have a kitchen and bathroom to qualify.
If you want to purchase an exciting refurbishment project, bridging finance can be a fast solution without stipulations about the property’s condition.
You can take out a bridge loan, including funding for the restoration work, and repay the finance when you sell the property or complete the job and can refinance.
Re-Bridging an Existing Bridge Loan
Re-bridging is a useful option if you’ve used a bridge loan, but the project has gone over the anticipated timescale, or you’re getting close to the end of the term.
Revolution often arranges replacement facilities to shore up your financing while your property project completes or to find a more competitive interest rate.
Residential Bridging Loans
Bridging loans are commonly used in property development, but they’re also a potential option to purchase a residential property.
If you’re keen to move quickly and feel a high chance of missing out on your dream home, a bridge loan can enable you to proceed without waiting for someone to buy your current property.
Buying Auction Property With Bridge Financing
Auction purchases are another typical bridge financing application. Property auction payments work like this:
- You need to put down a 10% deposit on the day.
- The balance is due, in full, within 28 days.
- If you fail to remit the total, you stand to lose the property and your deposit.
It’s extremely unlikely that a mortgage will complete in less than four weeks, particularly when you build in delays for surveys, valuation reports, eligibility assessments and affordability checks!
Therefore, bridge finance is an excellent way to ensure you can pay the balance in good time and then have a much longer period to organise refinancing through a mortgage.
Using Bridge Loans to Solve Cash Flow Issues
Lenders offer bridge loans for pretty much any purpose, provided you can show how you plan to pay the loan back at the end of the term.
Businesses use bridging finance to shore up cash flow problems over a limited period, such as:
- Covering capital requirements if a customer is late paying.
- Purchasing stock in quiet seasons to prepare for busier periods ahead.
- Investing in new equipment, which you need quickly.
Most businesses encounter unexpected costs from time to time, and where speed is of the essence, a bridge loan may provide the fastest option.
Bridge Loans as an Inheritance Tax Solution
Probate and inheritance tax disputes can take months and sometimes years to resolve. Some beneficiaries find that they need a way to release a charge on a property, pay outstanding bills, or cover tax costs without much notice.
Bridging loans can be a good way to solve the problem, acting as a short-term funding route to pay any debts and release inherited assets.
Preventing a Repossession Through Bridge Lending
Property repossession is a complex and distressing issue, and in some cases, happens through no fault of the borrower.
For example, a landlord with multiple properties might find themselves in a difficult situation if a tenant or numerous tenants are late with their rent payments and cannot cover the mortgage costs.
Bridging finance can help here, too, enabling property owners to retain control, avoid a forced sale, and prevent falling into serious debt.