Bridging Loans a Simple Explanation
Bridging loans are a fast and flexible way to secure short-term finance when timing is critical.
Whether it’s moving forward with a property purchase or completing a development a bridging loan can provide the necessary funds exactly when they are needed.
A short-term bridging solution helps a client “bridge the gap” until more permanent financing is secured or when an existing asset is sold.
They can be the ideal solution where there is a need for quick access to funds and are typically framed for a period of 12 months or less.
In financial terms they can be a convenient way to get from A to B without the stress of waiting for traditional funding to become available.
When are Bridging Loans best used?
Here are some common situations where bridging loans can be helpful:
Buying a New Property before selling an existing one.
Imagine you’ve found your dream home but you haven’t yet sold your current house. A bridging loan can help you buy the new property without having to wait for the sale of the old one to go through.
Property Renovation or Development.
When planning to buy a property to renovate and then sell it for a profit a bridging loan can provide the upfront cash needed. This is often a good solution for property developers who need funds quickly.
Auction Purchases.
When buying a property at auction there is usually a need to complete the purchase within a very tight timeframe – often 28 days. Bridging loans can provide the fast cash required to meet that deadline.
Business Opportunities.
Sometimes a business opportunity comes along that requires a quick injection of capital. A bridging loan can help make that happen without waiting for traditional financing, which may take longer to secure.
How do Bridging Loans work?
Bridging loans are, in the main, secured against property, either residential or commercial.
They are typically interest-only, which means during the term of the loan, clients only pay the interest and the original loan amount is paid back at the end, either when the asset is sold or when longer-term financing is secured.
These loans are flexible but often come with slightly higher interest rates compared to traditional mortgages, simply because they are designed for short-term use and quick access to cash.
When is a Bridging Loan the right option?
Bridging loans can be a powerful tool for individuals or businesses that need fast access to funds to take advantage of an opportunity.
However, they are best suited for those clients with a clear exit plan – like selling a property or securing long-term finance to repay the loan.
We invite you to make contact should you feel that a Bridging Loan cold be a solution for your current needs.