While many borrowers using bridging loans will use them for a variety of purposes, they are a particularly popular form of financing which are popular with property developers wanting to fund a project.
They may need money quickly but only for a short-term to complete a property development, for instance, while other developers may need the cash to carry out a refurbishment of a property they own and are looking to sell on.
One of the attractions for bridging loan finance for property refurbishment is that the developer can get access to the funds they need very quickly to allow work to be completed.
Other developers may use a bridging loan to convert a property into a better condition which may then be acceptable to a commercial mortgage provider but not all properties are eligible for mortgages but bridging finance is a suitable vehicle for having works completed so the property can then be used to exit the loan.
Bridging loans are also popular for people looking to buy a property at auction
Bridging loans are also popular for people looking to buy a property at auction since they will only have 28 days to provide the funds in order to buy the property they want. This makes the option of a bridging loan an ideal solution and means they can access cash quickly without having to wait several weeks for a traditional finance provider to deliver funding.
Essentially, the bridging loan is repaid fully after the property development has been completed and sold and when the refurbished property has also found new owners.
Bridging loan companies may also offer borrowers the opportunity of moving their short-term loan to a longer term financial product which may include offering a commercial mortgage.
As stated previously, all bridging loan firms will be requiring an exit strategy regardless of the purpose of the loan and its duration.
Bridging loans may have a slightly higher rate of interest
While bridging loans may have a slightly higher rate of interest there are also additional costs that come when applying for them. Usually there will be an arrangement fee for the loan and administration fees as well, though these will vary from lender to lender.
The amount of funding available from bridging loan providers also varies between lenders with some offering tens of thousands of pounds at short notice while others will offer several million pounds; all of these are dependent on meeting the lender’s criteria.
Indeed, many bridging finance borrowers may find that a bridging loan calculator may prove useful in estimating how much it would cost to borrow a certain amount of money over the short term. Since there are different rates for different loan purposes between lenders it always pays to shop around.
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