Like all financial products, bridging loans are more suitable for some applicants than others. For the most part, people tend to associate bridging loans with financing to ‘bridge’ the gap between property sales and purchases. In reality, a bridging loan can be used for pretty much any legal purpose whatsoever.
Bridging Loans: The Basics
One of the best ways of getting to grips with the basics of a bridging loan is to check out an online bridging loan calculator. Enter a few simple details, hit the button and learn how bridging finance works. See how rates vary in accordance with several key variables and determine your capacity to meet your repayment obligations, should you decide to go ahead.
Understandably, bridging loans are available exclusively for applicants aged 18 years or over. Open to private and business borrowers alike, bridging loans are almost always secured against the applicant’s property, which can be a commercial or residential building. Multiple properties may also be combined to cover the cost of a bridging loan, while some lenders will consider other valuable assets on a case-by-case basis.
Bridging loans can be particularly useful for borrowers with an adverse credit history, along with those who are unable to provide comprehensive proof of income. Just as long as sufficient collateral can be provided to cover the cost of the loan, the funds required can be made available in as little as five days. After which, it’s a case of repaying the loan in one lump-sum payment, anything from a few days to around 18 months later.
Bridging Loan Suitability Examples
Producing a definitive list of bridging loan suitability examples is difficult, given the enormous flexibility of bridging finance. Nevertheless, there are certain common examples and applications for bridging loans that make full use of their unique properties.
Examples of which include the following:
- You intend to buy a property at auction and do not have sufficient funds on-hand to cover the costs. In such instances, applying for a traditional mortgage in the conventional way is simply out of the question.
- A homeowner or developer wishes to finance extensive renovation, extension or home improvement works, in order to increase the market value of a property which will subsequently be sold.
- The prevention of repossession, using a bridging loan to pay off an outstanding mortgage balance, prior to selling the property for its full market value, repaying the loan and retaining any additional profits made accordingly.
- A business owner faces an unexpected financial shortfall, which calls for an immediate yet short-term cash injection. Bridging loans can typically be secured against a variety of business assets and commercial properties.
- When a homeowner looking to relocate finds their dream property at an unbeatable price, but the sale on their current property hasn’t been finalised. They purchase the home of their dreams with a bridging loan and repay the balance in full when their former home is sold.
- An investor or everyday buyer wishes to purchase a property a traditional mortgage provider refuses to finance. Examples of which could be partially-built properties or properties with major structural issues, which can be purchased quickly and affordably with a bridging loan.
These are just a few examples of some of the most common applications of bridging loans in private and professional circles alike. Across the board, bridging finance specialists are able to tailor their loans and associated terms to meet the exact requirements of each borrower individually. All with monthly interest rates as low as 0.5% — sometimes even lower!
Eligibility for a bridging loan is typically determined exclusively on the provision of acceptable collateral. Most of the usual measures like credit checks, proof of income and general financial history simply do not apply.
If you think a bridging loan is right for you, speak to an independent broker and organise a whole-of-market comparison, before submitting your application.
Article by iConquer