Bridging loans can be a critical way for landlords, property developers and even homeowners to secure funding on a property when time and circumstances rule out a traditional mortgage.
It provides a short-term funding solution, but it does need to be paid-off within 12-months. That could be with a residential mortgage, Buy-to-Let mortgage or from the proceeds from the sale of the property.
1. The deal needs to be completed as quickly as possible.
This could be for a variety of reasons. It could be a landlord or property developer has an investment opportunity, and they need to act quickly to secure it. It could be a homeowner that has found a house they want to buy before they've sold their current home, or there's a break in the property chain that needs urgent funding.
2. Property Refurbishment
There are times when buying a property is too good an opportunity to ignore. One that needs heavy refurbishment or has been stripped back to the brickwork and might not have a functioning kitchen or bathroom. A mortgage would be impossible to obtain, so using a bridging loan to purchase the property could be the short-time solution whilst the property is brought up to standard.
3. Lease extension or purchase
If your client's leasehold is going to expire in the next 35-years, remortgaging could be a challenge. Taking out a bridging loan to buy or extend the leasehold, will make the property more mortgageable and once the transaction is complete, the bridging loan can be rolled into the new more attractive.
4. Buying a new house before selling
Your client suddenly sees the home of their dreams come onto the market when their house has just been put up for sale or it's not even on the market. Arranging a bridging loan could enable them to secure the property quickly and as a cash buyer with no property chain, it would make their offer more attractive.
5. Development exit
When the term of a development loan is coming to an end, a developer might not be in a position to pay it off. This could be for a number of reasons, there may have been a delay in completing the work due to worker or materials shortages, it could have taken longer than anticipated to get planning permission or they haven't sold the property or have a tenant in place. A short-term bridging loan could ease their funding woes and can be paid-off when their property is sold or rolled into a Buy-to-Let mortgage upon completion of the work.
The term of your client's existing bridging loan is coming to end, and they might not be able to pay it off. If for example, it's a block of flats, they may not have sold enough of the units to cover the loan, or the refurbishment is yet to be completed. A new bridging loan with an alternative lender could pay-off the loan and even raise additional funds. it can be paid-off when more of the flats have been sold or leased.
7. Business Uses
A client's business may need a quick capital injection to buy equipment, renovate their facility, buy stock, or pay a tax bill, a regulated (on their home) or unregulated (on any other property they own) bridging loan could be a fast way to obtain the essential funding required.
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