The value of Bridging Loans is only now reaching the market, and property developers have now become aware how valuable and powerful bridging finance is,in getting funds in place very quickly in order to close a deal that you might otherwise loose. We are also seeing property being purchased under value via bridging finance with a quick refurbishment and re- financed onto long term finance at more competitive rates.
Speed is what you get with bridging finance, a quick decision, fast survey and money available within 7-10 days on average.
Value of Bridging Loans
Bridging loans are loans are usually taken out to solve a temporary cash shortfall that may arise when buying a property or business, or perhaps paying for a renovation. A typical example of when you may need one would be if you want to buy a second property before you have sold your first, or you may need one if you are buying property at auction.
When considering a bridging loan clients should always be aware that this should be considered to be a short term answer to a problem that you have a long term answer to. In most circumstances bridging loans are agreed where clients wish to buy a second property and there is a delay in completion between their existing property and the completion of their new property. It would not be advisable to enter into bridging unless you have 100% assurance that your existing property will be sold within a fixed period of time. This is extremely difficult to guarantee unless you have an exchange of contracts from your proposed purchaser. This type of borrowing would best be described as a "closed bridge". If you entertain bridging finance without the benefit of a guaranteed sale you are then entering into an "open bridge arrangement" which could prove to be very expensive and clients entering into this arrangement should be well aware of the implications should they fail to complete on their sale.
Most banks charge a premium rate of interest for bridging facilities and although this can be an attractive option in the very short term clients should make sure that they have done their sums properly before considering this type of arrangement. Bridging facilities are normally available up to a maximum of 85% loan to value. Where we have a low loan to value application this will always be considered to be a lower risk and will attract lesser charges.
As a property developer you may need a substantial amount of money for a short period of time, normally 1---12 months. Specialist lenders will consider investment property proposals where there is an opportunity to add value above and beyond the initial purchase price by a combination of one or more of the following:
* Intensive management - improving the rental income stream by letting voids, reconfiguring accommodation and letting, progressing rent reviews, renegotiating leases, etc.
* By procurement of an alternative planning permission, effectively utilising the running rental stream to buy time/service interest whilst the planning process is followed.
* By breaking up the constituent parts of the investment into elements to be traded and retained.
A commercial UK bridging loan can give you a stronger negotiating position when buying commercial property, enabling you to buy a property without a contingency on the sale of your existing property or other assets. Often a bridging loan from £5,000 - £25 million on a first or second charge basis can be arranged.
As bridging loans are more risky for the lender than the usual house purchase loan or commercial loan, bridging loans are therefore more expensive and should only be used where you are fairly certain to repay them within the agreed term of 1----12 months.
Fast UK bridging loans are available for commercial reasons such as investment and owner occupied properties, including a commercial bridging loans for:
* Office complex
* Industrial
* Leisure facilities
* Retail & licensed premises
* Professional practices
* Commercial & residential development
* Buying property at an auction
How long do fast bridging loans take?
You should expect the entire process to take 7 to 10 days - i.e from your first application to the money being paid over to you.
It could be done quicker. It depends on how fast you want to move and if there are not any significant hiccups. Based on my research, interest rates can vary enormously dependant upon the lender used and the best loan to value is between 40% - 85% LTV.
* Completion possible within a minimum of 5 days.
* Fast efficient professional service.
* Funds available for any purpose.
Bridging loans are generally secured on property or other assets of high value - meaning that the value of your asset is used to guarantee your loan.
Payments are interest only, so your monthly repayments are lower as you are not paying back any of the bridging loan principal. As bridging loans are short-term loans, the interest rate will tend to be higher than that of, say, a mortgage, making bridging loans unsuitable for long term financing, but highly useful and profitable for when you need funds fast.
Adverse Credit History?
Bridging Loans are also available to the people that have found it more difficult to get mortgages. This enables these people to build a track record before applying for the conventional mortgage.
As the loans are secured on property, they can be effectively used to raise capital for any purpose, regardless of your credit history. Normally bridging loan brokers can help with IVA, IVA'S, BANKRUPT, BANKRUPT'S, CCJ, CCJ'S, ARREARS, DEFAULTS, MISSED MORTGAGE PAYMENTS.
Property developers can be assured that if they need the money fast, they can rely on Michael J Alexander to come to their rescue whatever their circumstances.
