As buying and selling properties becomes more difficult, bridging loans have an important role to play.
Bridging loans give both domestic and commercial property buyers the flexibility they need to complete their purchases at the right time. During prosperous periods where the property market is buoyant, domestic buyers in particular rarely need to use bridging loans, whereas commercial buyers often make use of them – particularly when it comes to taking profits from a below-market-value purchase. In today's tougher financial climate, however, bridging loans are becoming increasingly important.
The demand for bridging loans
Bridging loans occupy a unique space within the property market and most lenders offering bridging loans are specialists in that area. They concentrate on lending large sums of money, although they are happy to lend lower amounts provided the borrower can show how the money will be repaid. The main characteristics of bridging loans are:
• Short-term – a bridging loan helps a property buyer to cover the purchase of a property when other funds are unavailable. As soon as the funds are available, the bridging loan is repaid. The short-term nature of the loan gives the borrower flexibility and control over the purchase.
• Higher interest rates – bridging loans are known for higher interest rates but in fact, rates are probably lower than you expect. The higher rate reflects the short-term nature of the loan but shouldn't impact too much on your finances because you will be paying off the loan as soon as possible.
• Tougher criteria – bridging loan lenders will not approve the loan unless they are sure that you have arranged the means to pay it back. This could be from the sale of another property in your portfolio, or by arranging a remortgage once the property is yours. You must show that you have an exit strategy in place or your loan will not be approved.
• Higher loan value – bridging loans are available for up to £25m depending on the lender. This is particularly useful for commercial property investors who often need to borrow large sums to finance their property deals. The higher sums available also give you flexibility when it comes to negotiating purchase.
The fact that bridging loans require more evidence of repayment than traditional mortgages do is one of the main reasons that these products are less affected by the credit crunch. It's also one of the reasons that more property buyers will turn to bridging loans over the coming months to help finance both domestic and commercial purchases which in turn will help to boost the housing market.
Faster Bridging Finance has developed a new approach to commercial bridging loans that saves you time, money and hassle. Developed specifically to help those who invest in property occasionally or who have large property portfolios and want to be able to get cash out quickly, the service uses a dedicated mortgage broker and conveyancing solicitor so that there are no hold-ups, just a straightforward bridging deal. To find out more about how Faster Bridging Finance can help you, order your Free report now, call us on 01908 423717 or email finance@fasterbridgingfinance.com.