Bridging Finance is short term funding, secured against property (or land), which can be used for a number of reasons until either longer-term finance can be arranged or the property is sold in order to repay the loan.
There are many circumstances when bridging finance can be used to assist clients, but the main purposes are as follows:
Refurbishment of a property
This can include properties that are deemed not suitable security in their current condition by high street lenders and will have an enhanced value once the works have been completed.
Conversion of a property
This can include converting properties back to residential use from offices or public houses for example, which can be purchased with or without planning permission.
This occurs when a buyer has found a new property but need to complete quickly or face losing it because the vendor does not wish to be involved with a chain. Alternatively, clients may not want the added pressure of selling at the same time as buying or simply do not have time to sell their current home.
Also, a client may have lost the buyer for their existing property and time does not allow a new one to be found. In this instance, rather than waiting until a new buyer comes forward for the existing property and risk losing the new home, a bridging loan may be a suitable alternative.
Below Market Value Purchase (Discounted Purchase)
This is where a buyer has negotiated a purchase price well below the properties current value. Subject to the value of the property being confirmed it is possible to arrange a bridging loan that is based on the current value of the property and not the actual purchase price.
This means that the discounted purchase price can reduce the amount of cash deposit required. This type of loan is typically repaid via a remortgage or subsequent sale of property. Please note the remortgage cannot always be done within the first 6 months of ownership.
It should always be noted that given the nature of bridging funding, it is more expensive than a standard mortgage and should be considered only as a short-term funding option.
It is also essential to establish the exit strategy at the point of application to ensure the loan can be repaid.
If you would like to speak to a consultant specialising in this area, and we would recommend this, please call 020 7220 5100 or click here for more contact options.
Business such as residential and buy to let mortgages in the UK are provided through Coreco Partners LLP, other business such as overseas mortgages and commercial mortgages are provided through Coreco Specialist Finance Limited and are not regulated by the Financial Conduct Authority.
Coreco Specialist Finance Limited. Registered office: 117-119 Houndsditch, London EC3A 7BT. Registered in England, Number: 06851546
Things to consider
Do I want the security of fixed monthly payments?
How am I going to pay the loan back?
How much can I borrow?
How much deposit do I have?
Do I have money set aside for fees such as legal costs and stamp duty?
What exactly does the mortgage process involve?
Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.
A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495.
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