Following a fairly turbulent 18-month period, the UK’s bridging sector has well and truly bounced back; from established investors to homeowners planning property improvements, the popularity of alternative finance is at an all-time high.
But what is it specifically about bridging finance that makes it so popular? With such an extensive range of products available on the High Street, why have bridging specialists attracted so much attention as of late?
- Bridging Loans Are Fast to Arrange
One of the biggest points of appeal with bridging loans is the speed at which the funds can be accessed. Particularly when compared to a conventional mortgage or property loan, bridging loans reduce application processing times to bare minimums.
Waiting weeks or even months for a mortgage application to be processed is the norm. Conventional loans are therefore unsuitable for time-critical purchases, such as picking up a property at auction.
With bridging finance, the application can be processed, and the funds allocated within a matter of days. Enlisting the help and support of an experienced broker can streamline all aspects of the application process.
Where time is a factor and hanging around is not an option, consider bridging finance.
- Bridging Loans Can Be Used for Any Legal Purpose
Most conventional loans are similar in that they are issued for very specific purposes. If your application is successful, you are subsequently restricted with how the funds can be used.
Applying for bridging finance can be a wholly more flexible affair. At the time of the application, you may need to indicate why you are applying for the loan, but once the funds have been transferred, they can be used for any legal purpose whatsoever.
Just a few common applications for bridging loans include purchasing buy-to-let properties, buying land, picking up homes and business premises at auction, funding renovations, and refurbishments, raising business capital, and for chain break purposes.
All the lender is interested in is your capacity to repay the loan in full and on time. If you fit the qualification criteria for bridging finance, how you allocate the funds is entirely up to you.
- Bridging Loans Have Flexible Lending Criteria
Speaking of which, the criteria that must be met to qualify for a bridging loan are highly flexible. With traditional loans and mortgages, most of the application process is binary. A series of simple ‘yes or no’ credit and finance checks, with no room for maneuver.
The difference with bridging finance lies in how all applications are assessed by way of individual merit. It is a process that harks back to times when bank managers personally assessed loan applications and made their decisions accordingly.
With bridging finance, issues like no proof of income, a poor credit score, and a history of bankruptcy need not count you out of the running. Eligibility is assessed primarily on the basis of security – i.e., the assets used to secure the loan. You will also need to provide evidence of a viable exit strategy, indicating when and how you will repay the lender.
If the lender is comfortable, you can afford the bridging loan; nothing else matters.
- Bridging Loans Can Be Secured Against Most Property Types
Most loans and mortgages are fairly restrictive where eligible assets are concerned. For example, it is not usually possible to take out a mortgage against an uninhabitable home or a commercial property in need of major structural repairs.
This is where bridging finance can offer a real lifeline to investors looking to ‘flip’ properties for profit. Most bridging lenders are willing to secure loans against almost all types of properties. This includes residential, commercial, and semi-commercial properties, along with uninhabited properties and most types of land.
One of the most common uses for bridging finance is purchasing properties in need of repair, performing the renovations, and selling them at a profit.
Something that is not usually possible with a traditional loan or mortgage.
- Bridging Loans Offer Flexible Interest Repayment Options
Bridging loans are designed to be strictly short-term funding solutions. Repayment is typically made in the form of a single lump-sum payment, anything from six to 24 months following the date of the agreement.
For the benefit of the lender, all aspects of the agreement are drawn up from scratch. Essentially, every bridging loan agreement is a bespoke contract tailored to meet the requirements and preferences of both parties.
Interest payments can be made monthly or at the end of the term when the full balance is paid. It is also possible to transition a bridging loan to a more conventional long-term loan, a popular choice for buy-to-let investors.
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