Imagine the scenario: you are looking to move home you need to sell your house and have your eyes on the perfect place. However the seller of your ideal home wants a quick deal, but the buyer of your property is dragging his feet and you feel if you don’t purchase your new home now, you may lose the deal. Either you get a loan or you lose the chance to buy your perfect home. Your mortgage company will not give you the full amount before you sell your current property. So how can you get such a large amount of money in time?
Bridging finance or a Bridging Loan could be the answer.
Bridge financing or Bridging Finance as it’s known in the UK, is a high interest short term loan designed to “bridge” gaps like this but can be used for almost any investment. The loan is viewed to last only a few days, this is usually the case because of the high interest rates and the quick response times of the company. In a home buying situation such as this you’ll need to provide proof of offers on your current home and for your new home and you should be able to access around 80% of the equity of your current property. This is used to buy the new home.
When the sale of your old home is complete you use the money to pay back the bridging loan and interest.
Commercial Business Loans
Bridging loans are most regularly utilised by the business sector. Bridging loans can assist with the construction, acquisition or renovation of a commercial property when the owner needs to make staged payments as the work progresses.
Other examples are when a partner in a business needs to buy a colleague out, and purchase his shares quickly. A bridging loan is used to purchase the shares as a bank loan may not come through quick enough.
Examples of uses of cases where Bridging Loans are used:
- A loan for property developers
- for property speculators
- to buy a property at property auctions
- to break mortgage chains
- for investment buy-to-let properties
- To get a loan within 24 hours
- A loan to break a mortgage chains, thus working outside normal mortgage lenders
- A loan for investment buy-to-let properties
If you need a Bridging loan for any of the above reasons, good luck but make sure you fully know the clauses and the rates required.