Whilst working out here in France, I’ve had a few UK-based clients recently asking me about how they can finance property in Provence whilst still waiting for their home sale to go through in the UK. Whilst it’s not particularly easy, there are ways in which you can do it – typically using something called a bridging loan. Here’s another overview from me on what this entails and how a bridging loan can be used. If you would like to discuss this in more detail then please contact me to make an appointment or to have a telephone consultation.
Please note as terms of a disclaimer; I work with a company in the UK called Bridging Experts, and so any links in this article do go straight to them. If you decide to work with me, then I will always use them for any quotations and calculations for a bridging loan as they are my preferred supplier.
Bridging loans refer to financial assistance given for the purpose of acquiring property over a short period while seeking permanent financing. That is, they help fill the temporary gap when buying or renovating property. These loans are secured hence they usually require significant collateral. The repayment period ranges between 6 and 12 months. However, this is dependent on the borrower’s ability to repay.
Types of Bridging Loans
There are two types of bridging loans namely the closed and open finance. For starters, closed finance is where the lending institutions have the discretion of determining when the loan should be repaid. This option also has the backing of legal contracts and mainly targets those people that are considering purchasing new property. The good thing about this loan is that it is less risky. On the other hand, the open finance loan a repayment date is not spelt out for you. Moreover, you can use the loan for other purposes that are not purchase of property – you can see a full list of different bridging loans here on the Bridging Experts website.
When to Go for Bridging Loans
Bridging loans come in handy when faced with different situations that need urgent financing. Some of these include when you are unable to sell existing property so that you can purchase new property. You can also opt for these loans when faced with an impending deadline yet you do not want to go for a long term loan. Sometimes a loan commitment at your bank may backfire yet there are other buyers waiting to purchase the property in the event that you are unable to pay hence the need to get a bridging loan. Although rare, there are instances where financial institutions are simply unwilling to fund your project or you would like to purchase a run-down property and redevelop it – having said that I have heard reports recently that Sainsburys Bank are starting now to accept these types of deal.
Bridging loans are also ideal for those people who have a bad credit score yet they require temporary financing in order to not only build their credit even as they work out on obtaining permanent loans. Ultimately, bridging loans are a sure way of solving your cash flow issues albeit on short term basis. It is possible to see how much you can borrow as many companies and websites have a bridging loan calculator on their website like the Bridging Experts do.
Things to Consider
While it is easy to obtain bridging loans, it is equally important to take a number of factors into consideration before applying for these loans. Some of these factors include the amount of money that you need, your needs, time frame as well as the area where you intend to spend or invest the money. Remember, you need to repay the loan thus you must put it to good use.
Advantages of Bridging Loans
Bridging loans presents a number of advantages. First, unlike loans that are issued by banks, you can qualify for a bridging loan against property that is broken down because the condition does not matter. Hence, you can be sure to get funds for repairs and renovations with ease.
Secondly, the application process is convenient and quick hence the loans can be authorized within a matter of hours.
Thirdly, these loans are flexible in the sense that you can use them for varied causes like renovation, land acquisition and debt consolidation among others. Lastly, the amount of money that you can receive is dependent on the value of the property that you put up as collateral as well as the repayment period. In summary, bridging loans are an excellent means of obtaining quick funding to close the gap in your real estate needs.