What Is Bridging Finance and How Does It Work

Bridging finance is a way to get capital by using real estate you already own or for purchasing new real estate. Depending on the type of real estate you are trying to purchase and the type you are using, there are a number of different bridging finance options available to you. The loan will have around a six month duration, as they are designed only for short-term loans.

You will only be able to get a certain percentage of the current market value of the property being used as security for the loan, because you will be using property that is already owned, as security and collateral. This is usually 85% for residential properties, 65% for commercial properties, and 70% for land. These are standard percentages but they can range higher if additional properties are added to the security.

The cost of these types of loans is usually between 1-2% based on credit and the type of property being purchased. The uses for these loans are varied as well as what types of properties can be used to 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 minimum figure that you can take out as a loan is 30,000 to a max of 10,000,000. This relies on the share referred to before about the market value of the property used as collateral. The amount of money you can borrow depends on the value of your property offered as security; the higher the value, the more the loan amount.

You can make use of bridging finance options in innovative ways, such as securing a property at an auction or buying residential property even before the property you now own and put on the block for sale is actually sold. Look for bridging finance alternatives which will permit you to let go of the equity in your property in order to liquidate your obligations, have a house make over, reconstruct, or invest in an enterprise. Bridging finance options can also be used to get money for investment purchases, including 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.