cherryFind is a specialist to facilitate bridging loan for prospective buyers.
We've all become accustomed to the property renovation shows that have invaded our TV viewing over the past few years especially during the housing and developing boom of the new millennium before the credit crunch hit the property market. Whilst these shows are still regulars on the TV listings it's fair to say that current market conditions has resulting in them having to take somewhat of a different tack. Many now include the auction process as a more conventional and cost effective way to buy property and this is where a bridging loan can be particularly useful for any prospective buyers.
Property auctions can indeed provide a great opportunity to pick up a bargain or development project. Buying at auction usually means having a very limited time in which to complete. A bridging loan can help facilitate this process to allow the successful bidder to complete within the required time until they get their long-term finance in place or to bridge the gap if their arranged funds fall short of their final bid.
However, it is not solely for those looking to buy at auction, there are a number of other uses. As an instant form of remortgaging there are also various ways that a bridging loan can help if normal purchasing fails to deliver real value. In a case where a developer or builder is prepared to sell multiple properties at a discount, in exchange for fast completion, bridging finance, if used correctly, can become a useful facilitator and profit generator.
To put this into context, generally speaking there are two main types of bridging loan; the open and closed bridge. The open bridge is usually taken out by those buyers who have found their ideal property but have either not put their existing property on the market or it may already be on the market but a sale is yet to be agreed. In order to secure a bridging loan this way, the lender will insist on a large degree of equity being owned amidst a variety of supporting financial information and most lenders will put a 12-month limit on an open bridge.
However, the most common form of bridging loan is a closed bridge. This type of loan is only available to homebuyers who have already exchanged on the sale of their existing property. Very few sales fall through after exchange, so lenders are happy to offer closed-bridge financing as the element of risk is much lower.
As well as highlighting the benefits of a bridging loan it is also vital to outline the potential pitfalls. A bridging loan should be considered as an area of last resort borrowing as it invariably will have a high rate of interest therefore making them expensive. Of course it may prove its worth if this extra expense can help save a deposit and related fees that would otherwise be lost. But there could also be severe financial implications for borrowers doing it for the wrong reasons. There are many things to consider before taking out a bridging loan and it is advisable to seek professional help before doing so. In the right circumstance it can be a useful tool but in the wrong one it could be a very costly mistake.
cherryFind is a specialist to facilitate bridging loan for prospective buyers.
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