What Are The Benefits of Using Bridging Finance For a Property Purchase

Bridging finance, also known as a bridge loan, is a type of short-term loan that is used to “bridge” the gap between the purchase of a property and the securing of long-term financing. It is typically used for real estate transactions and can provide a number of benefits for property buyers.

One of the main benefits of using bridging finance for a property purchase is its speed and flexibility. Because bridging finance is a short-term loan, it can be approved and disbursed much faster than traditional financing options, such as a mortgage. This can be especially useful in situations where a property is being sold on a short timeline or the borrower needs to act quickly to secure a property. For example, if a property is being sold at auction, the borrower may not have time to secure a traditional mortgage before the auction takes place. In such cases, bridging finance can provide the necessary funds to purchase the property, with the expectation that long-term financing will be secured later.

Another benefit of bridging finance is that it can be used for property purchases when the borrower does not meet the traditional lending criteria of a bank. This can include situations where the borrower has a poor credit history or is self-employed. Banks and other traditional lenders often have strict requirements for borrowers, such as a minimum credit score or a stable income. In contrast, bridging finance providers may be more willing to work with borrowers who do not meet these requirements, as long as they have a viable exit strategy for repaying the loan.

Bridging finance can also be used for a variety of different property types and purposes. For example, it can be used to purchase residential properties, commercial properties, or land. It can also be used to refinance an existing property or to fund renovations or repairs. This versatility allows borrowers to use bridging finance for a wide range of real estate transactions.

Bridging finance can also be used to purchase a property with a lower deposit than is required for traditional mortgages. Most traditional mortgages require a deposit of at least 20% of the property’s value. However, some bridging finance providers may be willing to offer loans with a deposit as low as 10%. This can make it easier for borrowers to purchase a property, especially if they do not have a large amount of savings.

One of the main downsides of bridging finance is that it is typically more expensive than traditional financing options. This is because bridging finance is a short-term loan, and the lender needs to charge a higher interest rate to compensate for the increased risk. Additionally, some lenders may charge additional fees, such as arrangement fees or exit fees. However, this can be outweighed by the benefits that come with a quicker and more flexible loan option.

Another downside of bridging finance is that it can be risky if the borrower is unable to secure long-term financing within the specified time frame. If the borrower is unable to repay the loan, they may lose the property. For this reason, it is important for borrowers to have a clear exit strategy in place before taking out a bridging loan.

In conclusion, bridging finance can provide a number of benefits for property buyers, including speed and flexibility, the ability to purchase property when the borrower does not meet traditional lending criteria, versatility, and the ability to purchase a property with a lower deposit. However, it is important to consider the higher costs and increased risk associated with this type of loan. It is always best to consult with a financial advisor before making any decisions.

Platinum Global Bridging Finance is a distinguished high-net-worth finance broker. We specialize in providing tailored financial solutions, including Property Bridging Finance, Development Finance, Lombard Loans, Single Stock Loans, Margin Stock Loan and Commercial Property Finance tailored to meet the diverse needs of our clientele seeking robust financial lending solutions.

By on January 21, 2023   /   Blog  
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