If you are in instant need of money, a bridging loan is one of the fastest ways to access cash. It is a form of flexible, short-term loan that can be an ideal option when you are waiting for long-term loans to become available. So we can say that it bridges the financial gap and allows you to fulfil your emergency financial needs. Sometimes it is referred to as gap finance and usually lasts for three months to 24 months. However, you must keep in mind that it is a secured loan, and you have to use any of your property (residential, commercial, semi-commercial or land) as a security against the loan.
You can find numerous specialized bridging lenders in the market, and you can also take a p2p bridging loan as many p2p lending platforms also offer such loans. In addition, most lenders offer residential bridging loans, and you can use them for a range of purposes that we are going to explain in this article.
Purchasing A Property Before Selling Current One
The most significant use of bridging finance is to complete the purchase of a property before selling your existing property. You may find your dream home is on sale but waiting for your current home to be sold to get funds. Property on sale is a great opportunity, but it can take a long time to find a buyer and sell your existing property at the best rates. Now you don’t need to worry as you can get instant cash through bridging debt and purchase your new home. You can easily repay the loan amount after the sale of the property.
Buying A Property At Auction
Have you won a bid at an auction, but what’s next if you do not have the cash to deposit at the right time. When you are buying a property, you have a short time to complete the transaction. Typically, you have to pay a 10% deposit on the same day and the remaining price within 28 days of winning the bid. It is not possible to get a mortgage within this short period. In contrast with residential bridging finance, you can get approval within 24 to 72 hours in most cases. Therefore it can be a perfect way to eradicate the worries of not being able to purchase a property within this tight time frame. You can repay the loan amount when the mortgage is ready.
Doing Refurbishment Or Renovation
It might be hard to find a traditional loan to renovate an old property and make it habitable. Mortgage lenders find this property in its current state unsuitable. Thus, they do not accept it as collateral. However, with bridging finance, you can complete the refurbishment or renovation of your property and bring it up to a good standard.
It is beneficial for the buy to let property investors and property developers who need a property in a better condition sell it or rent it out at a better rate. Once the property is in good condition, you can also apply for a mortgage on it if you need a large amount of money. Bridging finance is arranged quickly, and you can repay it easily after selling the property or after securing a mortgage loan.
Avoiding Repossession
Another beneficial use of bridging finance is that you can use it to stop the repossession of your property. If you fail to repay the mortgage loan or a bank loan that is secured against property at the right time, your lender has the right to take legal action against you and sell your property to get the money back. Thanks to bridging loans, they provide you with quick financing to settle debts. This way, you can get time to sell your property at the market rate instead of the lender selling it at a potentially lower rate.
Navigating Mortgage Delays
As we have already described above, mortgage lenders take a long time to complete the application process and grant loans. In fact, even a simple mortgage loan application can take a month to process and grant funds. It puts many individuals and home buyers at risk of a deal falling through as they do not have the required amount to close the deal at the right time. A bridging loan is again an ideal solution in such a situation and can easily cover the time period between the purchase of property and securing a long-term mortgage. Once you get funds from a mortgage lender, you can repay bridging debt.
Purchasing A New Build Property
Using bridging finance for house purchases is very common. Property developers are always looking to purchase new build properties for their buy-to-let property portfolio. Property developers set tight deadlines, and buyers can also lose their deposits if they do not meet this deadline. So they can get financing through bridging loans to meet the deadline and complete the purchase smoothly.
Buying A Commercial Property
If you are an investor looking to purchase a commercial property to expand your property portfolio, bridging finance can help you in doing so. Getting a traditional loan to buy commercial or semi-commercial property is challenging, so bridging debt is the best option to provide a faster finance solution.
Other than these uses, you can use bridging loans to overcome your business cash flow issues, such as to pay wages, purchase new equipment or buy new stock.
Conclusion
Bridging finance offers flexibility and quick access to cash; that is why it is becoming more and more popular every passing day. However, you must also keep in mind that it is an expensive way of borrowing as it has a high-interest rate. You can take out residential bridging loans to meet your emergency financial needs, but before taking out a loan, you must make sure that you can afford to repay the loan on time. You can contact bridging finance specialists to know its cost and eligibility and to find out whether you should take it or not.
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