Bridging loans are short-term, fast-acting loans. They’re designed to bridge the gap between both immediate cash requirements and long-term financing, or on the sale of a property.
While it’s sometimes considered a ‘last resort’, they’re now a more versatile financial aid and can be used for up to 24 months, providing the funding you need with added security.
In this guide, we’ll look at five of the surprising ways a bridging loan can help your property plans, whatever they may be.
1. Great for purchasing un-mortgageable properties
Traditional lenders will often refuse mortgages on a property without a working bathroom or kitchen. Structural issues might also pose a problem when it comes to buying a property and funding it financially through traditional means.
A bridging loan can be used to help purchase these un-mortgageable properties by providing the necessary funds to renovate them until they’re fit for a traditional mortgage.
2. Rapidly acquire property at auction
Auction properties require a 10% deposit immediately, and full payment needs to be made within 28 days.
When it comes to a bridging loan, it can be arranged in as little as 24 to 3 days. It provides the necessary speed to complete a transaction that a traditional mortgage often is too slow to handle effectively.
While auctioned properties aren’t always the direct route that many won’t go down, bridging loans open up the opportunity to try it.
3. Bypass broken property chains
If a buyer pulls out of your sale, then a bridging loan is helpful as it allows you to act as a cash buyer in order to secure your new home. It prevents the chain from collapsing and gives you the breathing space you need to find a new buyer for your old home.
Many buyers will lose out on their dream home because of problematic property chains and other people within the chain pulling out at the last minute.
4. Fund light to heavy renovations
Beyond just buying, bridging loans are effective for funding renovations to increase your property value.
From cosmetic changes to major structural work or converting commercial property into residential. Bridging loans give you the ability to flip the property for property or for refinancing with a higher valuation.
A boost to your property value with light or heavy renovations is certainly advantageous.
5. Boost energy efficiency and value
Finally, a bridging loan can be helpful for the purpose of boosting energy efficiency and value. Upgrading a property’s Energy Performance Certificate rating can certainly be beneficial.
These bridging loans can be used to install solar panels, insulation or heat pumps. By making these changes, you not only make your property more energy-efficient but also increase its attractiveness and its value to potential buyers.
Bridging loans are a great way to help improve your opportunities financially when dealing with your property plans. From selling a property to financing for renovation work, there are many surprising ways in which a bridging loan could help your property plans this year and in the future.
