What Is Bridging Finance and How Does It Work
Bridging finance is a great way to get money for a variety of real estate purchases or to get money quickly using already established real estate in your portfolio. There are several different types of bridging finance options depending on the type of real estate you are using and the type you are looking to purchase. They are designed for short-term loans so the loan term will be approximately six months.
These types of loans use already owned property as security and collateral as a result with bridging finance options; you can only obtain a percentage of the established market value of the property being used as a security for the loan. Typically, it is 85%, 70% and 65% for residential, land, and commercial properties respectively. This can be higher if other properties are added to the security however these are the standard percentages.
Depending on credit and the type of property that is being purchased, loans of this type typically cost between 1-2%. There are many different ways that the loans can be used as well as what kind of properties may secure the loan.
Residential and commercial property, land, offices, retail locations, and what is referred to as mixed, can all be used as security. Property and developments can be residential or commercial options. “Mixed” implies that you are utilizing as your security, both residential and commercial locations.
The amount that you are able to borrow is usually set at a minimum of 30,000 and usually a maximum 10,000,000. This depends on the percentages mentioned earlier regarding market value of the property being used as security. The higher the value of the property you are using as security the more you can borrow.
You can make use of bridging finance options in innovative ways, such as securing a property at an auction or buying residential property even before the property you now own and put on the block for sale is actually sold. Look for bridging finance alternatives which will permit you to let go of the equity in your property in order to liquidate your obligations, have a house make over, reconstruct, or invest in an enterprise. Bridging finance options can also be used to get money for investment purchases, including commercial property.
Bridging finance loans can be obtained either through high street lenders or through specialist lenders. You may find that rates are better through the specialist lenders but you should research both options to make sure you know what all the available terms and conditions are.
Some other things to consider is that in addition to the cost of between 1-2% on the bridging finance option you choose you will have to pay an arrangement fee for the arrangement of the loan and a valuation fee is usually required. A valuation fee is assessed based on the value of the property being used as security it is usually however only a few hundred pounds.
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