Finding the perfect property for your needs doesn’t always fall at the moment that you are ready to move. Whether it’s buying a property at auction or you are looking to downsize but haven’t sold your home and need to release the equity quickly, we can help you to finance a short-term bridging loan.
What is bridging finance?
Bridging finance is an umbrella term for a range of short-term loan products which are secured against either a residential or commercial property. With the emphasis on the words ‘short-term’, this type of loan is quick to arrange, typically taking a week or two, although this can sometimes be quicker, depending on your individual circumstances.
You may only require a bridging loan for as little as 48 hours, though the product term can be anywhere from one to 12 months. Often a bridging loan is used to bridge the gap between two property purchases falling simultaneously, but equally this could apply to the purchase of land, an office or commercial unit.
For example, if the proceeds of your house sale are funding your next purchase, but the sale is taking longer than expected and you run the risk of losing your onward purchase, a bridging loan would enable you to complete the transaction of your onward purchase, despite not having sold your current home.
Available for both residential and commercial property, a bridging loan can be used to facilitate any project with borrowing usually available for up to 75 per cent of the value of the asset.
What can a bridging loan be used for?
Although often used when buying a property at auction – where funding is released around 20 days after the deposit is paid – a short-term bridging loan can also enable you to purchase a house, land, shop or office unit before you have sold your current home or commercial premises.
A short-term bridging loan can also be used by property developers to finance an investment site which they intend to develop and sell at a profit, before moving on to another project.
Development finance can be used for new-build property or property conversion with an initial payment followed by staged payments of funding throughout the development. A bridging loan can even be used to refurbish a buy-to-let investment to bring it up to market standard before it is released as a rental property.
There are a variety of bridging loan products to choose from and investors can select a product tailored to suit their needs. Some of the bridging finance products available include:
- Residential bridging for residential property types
- Commercial bridging for offices, shops or land
- Refurbishment loans, where work is required to bring your buy-to-let property up to standard and ready for market
- Development finance for new build developments and property conversions, whereby an initial payment is followed by a staged payment release of funding
- Auction bridging where payment is usually due within 20 working days after an initial deposit has been paid
Getting the most out of short-term finance
The key to using a short-term bridging loan effectively is to know your exit date and stick to it. A bridging loan attracts a higher rate of interest and may also involve some additional administrative costs, so having a strategy to repay or switch to a more traditional mortgage product is important.
Whether you require funding for as little as 48 hours, a month or even a year, a bridging loan can provide an excellent solution to make your property plans a reality. With extensive experience of organising bridging finance solutions for clients in a wide variety of circumstances, we can help to find the right short-term loan for you.
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