Bridging loans are a short-term finance facility that can be secured against one or several properties and they are often used by property developers, landlords and business owners as a fast and flexible and financial resource.
Why would someone need a bridging loan?
There are a number of reasons why borrowers need a bridging loan but the most common use is to purchase a property quickly. They will then either renovate the property and sell for a profit or retain the property into their portfolio by flipping their bridge onto a buy-to-let product. Bridging loans are also often used to solve short-term cash flow issues or refinance existing facilities.
If you are a borrower considering a bridging loan, here are some helpful tips to steer you in the right direction.
#1 – talk to a broker
There are many commercial finance brokers in the market and most will have strong relationships with dozens if not hundreds of lenders.
Brokers will know who to approach for your specific requirements, know how to present your case and can negotiate terms on your behalf. Cases will often progress more quickly and smoothly if there’s a broker involved.
#2 – know your stuff
For a case to move quickly you’ll need to be firm with your requirements. You need to know how much money you need, how long you need it for and, crucially, how you intend to pay it back. Your broker will be able to help you with this.
#3 – utilise your portfolio
If you’re buying a property it is possible to raise 100% of the purchase price using a bridging loan. This can be done by leveraging any existing properties you have meaning the lender can remain secure whilst providing you with every penny you need.
This can be trickier if your existing properties already have loans secured against them, but there are solutions and we are more than happy to help you find them.
#4 – renovation
It is incredibly common for borrowers to purchase properties with bridging loans that the high street banks consider “unmortgageable”. Properties can fall into that category for a number of reasons but the most common is that the property is severely damaged and unlivable.
Properties in this state can usually be bought cheaply, which catches the eyes of investors who see long-term gains. The property can be purchased and renovated with a bridging loan and then sold at a profit or refinanced using a facility from a high street bank who, at this point, could see the property as being eligible for a mortgage.
Discuss your options further with Velocity Bridging on 01704 339588 so you can get a tailor-made loan directly for your purposes.