If you need to borrow money quickly, bridging finance can be helpful as it gives you quick access to funding. According to Mortgage Solutions bridging loan transactions reach a three-year high to £716 million in 2022.
The biggest growth in use has been to fund an investment purchase which accounts for 23 percent of the market. Other uses, including second charge bridging, stood at 13.7 percent and the average term was 12 months.
In a post-lockdown environment, rates and loan to values are in constant change so it is increasingly important to use a specialist broker who has access and knowledge to products to steer through the complexities of taking out a bridge.
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Reasons When To Use A Bridging Loan
1. Acquisition Of A New Property
You may find yourself in a situation where you're using money from the sale of another property- which hasn't yet been completed to buy another investment property.
A bridging loan is a fantastic option in this situation because it 'bridges the gap' by giving you the money you need to buy the new investment. You can then use the sale proceeds to pay back the bridge once the property has been completed.
2. Auction Purchase
Congrats on your new purchase! Typically after the winning bid, you will be required to put down a 10% deposit with the balance paid within 28 days.
A bridging loan can eliminate the worry that you won't be able to finish the property purchase in the short amount of time allocated.
3. Funding A Refurbishment Or Renovation
A traditional lender may deem the property in its current state unsuitable for mortgage purposes, making it nearly impossible to obtain financing for renovation. A bridging loan can be the ideal solution because minor renovation and refurbishment projects typically take a short time.
For property developers or buy-to-let investors who need to improve the condition of an existing property, add a new bathroom or kitchen, or make improvements before renting it out to new tenants, borrowing money for renovation is especially helpful. To close the short-term funding gap, the bridging loan can be quickly arranged. Once a traditional mortgage has been secured following the project's completion, it can then be repaid.
4. Commercial Property Purchase
Every established landlord will say you need to be able to seize an opportunity as soon as it arises as the market is so competitive.
Commercial mortgages generally have a much higher level of complexity whereas traditional lenders frequently require a higher deposit and a more stringent income stress test, making it more difficult to access money.
Bridging can come in as a short-term solution in a timely completion period. Accelerated Finance has completed commercial cases in a matter of 10 working days.
5. Mitigating Long Term Mortgage Delays
As mentioned above, traditional mortgages can take time. In fact, processing and releasing the necessary funds can take up to a month for a straightforward application.
If funds are not available during a certain time period, many people can risk their deal failing completely.
This article is intended to provide a general understanding of the topic. The contents should not be treated as advice.
Accelerated Finance Limited only considers applications for commercial or investment properties.
Accelerated Finance Limited is not regulated by the financial conduct authority and only provides unregulated loans via our network of lenders. Your property is at risk if you fail to make payments on a Mortgage Contract.
Please note that Accelerated Finance Limited and its employees do not give financial advice or recommendations on any product.