Bridging finance, sometimes known as high speed property finance, is really a’financial tool’used to improve funds against the worthiness of a property. These funds may be used for any legal purpose, maybe to buy another property or to raise capital for many other reason. Bridging finance is primarily for brief term purposes – typically one or two months but can be for approximately two years. Literally any residential or commercial property which includes provable value can be utilized to secure a bridging bridging finance uk loan.
A few of the main purposes to which bridging loans can be put:
1) Purchase of a residential or commercial property before the sale (or re-mortgage) of an existing property.
2) Purchase of home where speed is essential to clinch the deal
3) Funding can be arranged for property in need of substantial repair or refurbishment pending a longterm mortgage.
4) To prevent bankruptcy of other financial crisis by releasing the equity in a property.
Bridging loans can either be based on the “restricted sale value” of home or the Open Market Value (OMV). The difference is merely down to the preference of someone lender; a specialist commercial broker will be well conscious of the difference and should make sure that that is made clear to the client.
How can it work?
A professionally prepared valuation report is the back-bone of a bridging loan. Most bridging loan applications undergo relatively few background checks on the client’s capability to repay the loan, which means lender must depend on the valuation for their security. Most bridging lenders may have a preferred list of surveyors so it’s better to leave arranging the valuation to your broker.
Whilst waiting for the valuation report the lender will usually carry out their statutory checks on the applicant and prepare yourself to issue the formal offer documents or facility letter when the valuation has been completed.
Kinds of Bridging Loan
Whilst researching bridging finance you will come over the terms “closed bridge” and “open bridge “.In principle a sealed bridge is where the’exit route’or’repayment source’has already been arranged typically where contracts have now been exchanged nevertheless the funds are not going to become obtainable in time. On another hand, “an open bridging loan” means that there’s not a confirmed repayment method. Just like most things financial, there’s a gray area involving the two. The main things is always to be sure you are arranging the right finance for the circumstances. That is in which a specialist bridging finance broker is better placed to assist.
Bridging Finance in the UK
These day there are more bridging finance lenders in the UK than there have ever been, so rates are coming down and terms are becoming more flexible. When working with a bridging finance broker don’t forget of requesting the terms of the loan to be explained in plain English. You will often be quoted a broker fee and a lenders arrangement fee. The interest rates and any repayment charges ought to be explained at the outset bridging finance uk.