The upturn in the economic climate and government incentives has allowed the building and housing market to grow. The growth in the housing market has meant that building and developing residential property has become an attractive proposition once again. This has led to increased finance needs from developers and entrepreneurs alike, bridging finance has now become an appealing option which the team at Primary deal with on a regular basis.
In recent years bridging finance has turned from a specialist lending solution to a main stream option and this has bought more lenders into the market giving our client greater choice. There is many reasons that bridging finance may be something that you are looking, but what do people use bridging finance for?
- Commercial Property Purchase
- Residential Property Purchace
- Auction Properties
- Development Funding
- Renovation Projects
- Business Cash Injection
What Is A Bridging Loan?
A bridging loan is designed to be a short time loan it can be used by individuals and business for any of the reasons outlined above. It is designed to be temporary finance and should always have a repayment vehicle attached to it.
There are two main types of bridging finance closed bridging and open bridging. With closed bridging the borrower has a set repayment date which is outlined at application stage. Open bridging is where a exit plan is proposed to the lender there is still a clear close date at which the loan has to be repaid but this option does offer slightly more flexibility and can be used if sale of property or exchange has not yet been confirmed at the point of taking out the loan.
One of the main differences between a bridging loan and a standard mortgage loan is the speed in which it can be arranged for the client. A standard mortgage can take on average 3 months where as bridging finance can be arranged within just a few days.
The process normally takes anywhere between 7-28 days but can be arranged a lot quicker. The amount of time depends on the individual criteria and what the customer is looking to achieve from their bridging finance. Once the funds are released interest payment can either be paid monthly or rolled on to the closing balance of the loan and repaid at the date agreed at the outset of the agreement.
People are using bridging finance more regularly because of the flexibility and ease of raising short term finance that this option provides. Interest rates quoted are monthly and not annually, but this will be explained to you by your advisor and set out in the terms of business. In the past bridging finance has been seen as a rather expensive short term solution but because of the increase in popularity more and more lenders have joined the market and this increased competition between the lenders has seen rates fall to make it more attractive for individuals and business owners.