While borrowing money from family or utilizing personal savings may work well for smaller purchases such as cars or paying off credit card debts, it’s less feasible for larger investments like residential or commercial properties. You can opt for fixed or variable rates, providing flexibility in alignment with your financial strategy and market conditions. Crafted to cater to the needs of property development projects, this financing route is designed to provide the necessary resources to bring your development visions to life.įor those dealing with commercial properties, commercial mortgages step in as a suitable choice. Property developers will find property development finance to be a dedicated option. However, keep in mind that the maximum borrowing amount might be influenced by the equity you hold in your property. These loans are secured against property, often resulting in lower interest rates compared to bridging loans. If you’re considering raising funds through a second charge loan, secured loans could be your ideal solution. What are the alternatives to bridging finance? In this scenario the only borrower caveat is that they do not have a criminal record or are currently being investigated for any form of fraud. Again, this shows the benefit of working with a broker who knows and understands the market and can point would-be borrowers to the right lender.Īs with most borrowing, the track record of the borrower will affect the interest rate and fees offered on bridging loans, though some lenders offer a ‘valuation only’ product where their primary concern is the property value and detail within the legal conveyance pack. Some lenders only want to deal with prime borrowers with exemplary credit ratings where others actively prefer to deal with borrowers who have suffered difficulties managing credit relationships. If the loan exit is via re-mortgage, then the lender will want that borrower or their credit broker to prove that a viable re-mortgage is or will be available. So long as the lender is satisfied with the ultimate exit strategy and repayment of the loan, personal credit scores will be less important. How much does bridging finance cost?Īs the focus is on the property rather than the lender, bridging loans are often available to people for whom other borrowing is not an option or too expensive. It may also be used as a non-status commercial mortgage, where a business has been suffering financial difficulties and their existing lender will not lend any more funds or reschedule their existing payments.įor businesses that have ceased trading and are waiting to sell a property or premises, a bridging loan offers a solution in circumstances where a traditional commercial bank will struggle to demonstrate the loan can be serviced and will often ask the borrower to repay the loan prior to the property sale. Whilst this type of facility can be used for these purposes, they can also be utilised in other scenarios too as we will see below.Ī bridging loan may be used to purchase a property that requires light or heavy refurbishment and is therefore not suitable for a traditional mortgage. When should I use a bridging loan?Ī very common misconception is that bridging loans are only used when purchasing property at auctions or when buying a new property before you have sold another property. The priority for bridging lenders is the exit strategy as this is how they will get repaid: the key question for the lender is: “What will change during the term of the loan to allow the borrower to repay the loan?” Usually this means that bridging loan exits are via re-mortgage to a conventional lender or sale of the property utilised as security. This provides the lender with the surety that the interest will be paid on time and provides the borrower with the comfort they don’t need to make payments that may be impossible due to cashflow constraints. When a bridging loan is approved most lenders will build in an interest reserve facility which allows them to take payment on the loan over the term without committing the borrower to make a monthly payment. The major difference between a mortgage and a bridging loan is that while a traditional mortgage lender will focus on the ability of the applicant to maintain payments on the loan, a bridging lender focuses more on the property and its suitability as security.
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