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Can a Bridge Help You Purchase a House?

Bridge: n. Something that provides a link, connection or means of coming together. A structure across an obstacle. Control Room. v. To build a bridge. Create a means of communication

Despite forming a significant part of the UK lending market, BRIDGING FINANCE is little understood and often thought of as the unknown relative of the sector. It is a non status loan based solely on the equity in the property being used as security. The term "bridge" conveys the fact that the loan is designed to get you over a temporary obstacle.

 

BRIDGING FINANCE is simply a short term mortgage loan
that is secured against property.


BRIDGING FINANCE is very flexible and;

  • can run for any short length of time, although this usually ranges from one day to one year at most.
  • is mainly used as a stop gap when funds are required quickly.
  • is very useful for raising funds while waiting to secure a longer term mortgage or loan.
  • can cover shortfalls between buying one property and selling another.
  • can be used to purchase property at AUCTION.
  • can be used to fund the deposit required for the mortgage to complete.

 

BRIDGING FINANCE is not limited to just purchasing property and can also be used for;

  • Land purchase
  • Development finance for building property
  • Overseas Property purchase for commercial, residential and holiday properties
  • Business capital finance
  • Holidays & weddings or the dream of a lifetime
  • Cashflow when cash is needed urgently for whatever reason

 

Many property purchasing BRIDGING FINANCE loans are only for one day.


Until as recently as early 2008, Investors were able to arrange a BRIDGING LOAN to purchase the property outright for cash and arrange a remortgage to pay off the BRIDGING LOAN the same day. The major advantages of this arrangement are the speed at which purchases can be completed and the ability for creative financing to be employed

Other short-term BRIDGING LOANS will usually provide a three month facility, with the terms being flexible. If the facility runs over into a longer period, heavy penalties are often applied.

 

BRIDGING FINANCE is traditionally considered an expensive option, however, it is not necessarily so and the convenience can far outweigh the cost implications.


A one day BRIDGING LOAN will incur a set charge based either on a fixed fee or on a percentage of the amount loaned.

Short term BRIDGING LOANS up to 12 months, will have an arrangement fee of 1%+ of the money funded. They will also incur monthly interest and are charged at a percentage of the amount loaned per month. This typically ranges from 1% to 3% per month above Bank of England base rate or LIBOR.

BRIDGING FINANCE Companies will offer a variety of payment options that clients can choose depending on which option best suits their requirements and circumstances including normal monthly payments, deferred payments, roll-up and part payments.

Using BRIDGING FINANCE to purchase property at AUCTION is a popular method. Speed is important in all types of Bridging Loans, however with a property AUCTION, the timing of finance is crucial due to very short time scales being imposed. A loan can be agreed based only on the property’s valuation not on the purchase price. This would usually be for up to 75% of the market value so in some cases, this could mean funding of up to 100% of the actual purchase price.

 

 

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