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.
Bridging finance alternatives use loans guaranteed and supported by titled property, so you can only take a share of the accepted market value of the property serving as a guarantee for the loan. The loan amount is usually 85%, 70% and 65% of residential, land and commercial properties respectively. If other properties are included in the security, this can be more, but these rates are 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.
Bridging finance options can be used to secure a property at auction, they are also useful when you have to purchase residential property such as a home before the property that you currently own sells. You can also finding bridging finance options that will allow you to release the equity in your property so that you can pay off debts, remodel, renovate, or even put money into a business. You can even use bridging finance options to obtain money for investment purchases and of course for the purchase of 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.
While the cost on the bridging finance option you will incur will normally be 1-2%, you will also have to pay a fee charged for loan arrangement and a valuation fee. The valuation fee is calculated based on the value of the property offered by you as security and usually runs to only a few hundred pounds.