Bridging Loan - £50K to £50M
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What is a bridging loan?
What is a Bridging Loan?
A bridging loan is a short-term financing solution designed to “bridge the gap” between buying a new property and selling an existing one. It provides quick access to funds when time is critical, especially during delays in property sales or other financial transactions.
Common Uses of Bridging Loans
Bridging loans are versatile and commonly used for:
- Facilitating property purchases before selling an existing property.
- Providing temporary financing for investment opportunities.
- Funding urgent projects or expenses.
- Ensuring quick access to capital when traditional financing is too slow.
Types of Bridging Loans
Open Bridging Loans
- Ideal for borrowers needing flexibility and speed.
- No fixed repayment date, allowing repayment when funds become available.
- Typically secured against a property and subject to higher interest rates.
Closed Bridging Loans
- Suitable for borrowers with a clear repayment plan, such as a pending property sale.
- Fixed repayment date, often tied to a specific transaction.
- Lower interest rates but requires proof of repayment method.
Bridging loans are powerful financial tools for those needing rapid funding, but borrowers should carefully consider their repayment plans and costs.
Bridging loan overview
| Loan Amount: | Loan Term: | Interest Rate: | Lenders: |
|---|---|---|---|
| £50K to £50M | 1 – 24 Months | Customized for Individual Loans | Whole of Market |
How does a bridging loan work?
Bridging loans are an excellent solution for filling a temporary financial gap. They come in handy when you need to borrow money for a short period. These sorts of loans are ideal for time-sensitive transactions (auctions) or when you’re purchasing a new home but haven’t sold your current one yet.
Let’s take a closer look at how a typical bridging loan operates:
Step 1:
After spotting a house in an auction with great potential for refurbishment and subsequent profitable resale, you've set aside £75,000 to invest. However, it's important to note that the auction's reserve price is £250,000.
Step 2:
Your next step involves evaluating the property's renovation requirements, which are estimated to cost £100,000. Upon completion of the refurbishment, the property's value is expected to soar to £500,000.
Step 3:
At this stage, you have the option to approach a bridging company for assistance in acquiring the property and financing the renovation expenses.
Step 4:
After completing the renovation, you have two options: sell the property, settle the bridging company's debt, and keep the profit, or refinance the property, clear the bridging company's debt, and lease it for a monthly income.
Alternatives to a bridging loan
- A Personal Loan
- Secured Loan
- Business or Personal Overdraft
- Invoice Financing
- Asset Finance
- Credit Cards
Bridging loan examples
Bridging Loan for Purchasing a New Property
aka: Chain Break Bridge
“..Tom has successfully exchanged contracts with the seller of his new property, but his purchaser’s solicitor requires additional time to fulfil a mortgage condition. As the agreed-upon completion date for purchasing the vendor’s property is rapidly approaching, Tom finds himself in an urgent situation. To fulfil his obligation to buy the new property while his current home is still on the market, Tom requires a bridging loan. The loan will be promptly repaid once his existing property is sold, resolving the temporary financial gap in the process..”
Bridging Loan for Renovation
aka: Renovation Bridge
“..In the process of renovating a buy-to-let property, Joanne finds herself in need of additional funds to cover the renovation costs. To address this financial requirement, she decides to apply for a bridging loan.
Once the renovation work is completed, Joanne plans to repay the loan either by selling the property or by remortgaging it, ensuring a smooth resolution of her financial obligations...”
Faster House Purchase
aka: Auction Bridge
“..After successfully purchasing a property at an auction, John faces the urgency of obtaining rapid financing. Traditional lenders are unable to process a mortgage within the necessary timeframe, leading him to choose a bridging loan as an alternative solution. Following the purchase, John plans to secure a long-term lender, allowing him to repay the bridging loan effectively and achieve a seamless financial transition...”
Investor Cash Buyer
aka: Drawdown Bridge
“..Dawn aims to swiftly acquire investment properties but requires additional available cash. To address this, she establishes a pre-approved drawdown bridge, utilising the equity in her current properties. This enables her to promptly secure new properties without the delays associated with a traditional mortgage. Subsequently, Dawn can remortgage the acquired property, using the funds to repay the bridge loan, thereby preparing herself for future property purchases...”
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Thinking of getting a mortgage? Our experienced team of skilled mortgage advisers are here to offer the essential guidance you require. Relying on our comprehensive understanding of the mortgage market, we’ll ensure you secure the perfect mortgage to suit your specific situation.
About the Author
Liz Syms is the CEO and Founder of Connect Mortgages, a specialist in finance for property investment. With over 25 years of experience in mortgages and financial services, Liz has helped countless people get their dream homes and investment properties. She is passionate about giving her clients the best advice possible when it comes to financial decisions relating to mortgages and protection and is dedicated to providing the highest quality of service. With her wealth of knowledge in the industry, Liz is a respected leader in mortgages and financial services and has grown her team to over 300 advisers nationally. She strives to make Connect Mortgages one of the most successful companies in its field.
About the Author
Liz Syms is the CEO and Founder of Connect Mortgages, a specialist in finance for property investment. With over 25 years of experience in mortgages and financial services, Liz has helped countless people get their dream homes and investment properties. She is passionate about giving her clients the best advice possible when it comes to financial decisions relating to mortgages and protection and is dedicated to providing the highest quality of service. With her wealth of knowledge in the industry, Liz is a respected leader in mortgages and financial services and has grown her team to over 300 advisers nationally. She strives to make Connect Mortgages one of the most successful companies in its field.