5 Facts About Bridging Loans For Property Financing Today

Buying, refurbishing, and refinancing properties is a great investment opportunity, especially now that the property market is experiencing a welcome buoyancy, but unlike most investment opportunities, investing in properties is capital intensive and you need to have some hard cash lying around if you want to succeed in it. 

For example, if you come across a discounted property, you want to buy it quickly, carry out a bit of work on it to boost its value, and then look for opportunities to make your profit quickly, but where you don’t have deep pockets, this can be an issue. Of course, there is the joint venture alternative, where you join funds with cash investors to fund the project, but this is not a route everyone will want to take. 

So, this is where bridging loan/ finance comes in. 

What Is A Bridging Loan

A bridging loan is a quick loan instrument that allows you quick access to a secured short term loan so that you can overcome a specific financial issue in your property investment process. For example, you may need quick funds to carry out vital renovations that will increase the value of the property. 

Bridging loans are ideal for property investors looking for help with development finance to quickly buy up properties they intend to flip or refinance in the future. 

If you are in the middle of financing a property development and think a bridging loan in what you need, here are a few things you should know about this strategy. 

Source of quick funding

One thing about the property market is that it doesn’t wait for anybody. This means that there is only a very small window of opportunity for you to close a deal on the property you have your eyes on. In a situation like this, you can choose to apply for a mortgage or get a bridging loan. While applying for a mortgage is a good idea, the mortgage process can be quite lengthy and time consuming, and there is a huge chance that you will lose the property before your application is granted. Applying for a bridging loan however is a faster process. In fact, as long as you can meet the necessary requirements, you can be sure of getting the funds you need, when you need them. 

Flexible finance

No matter how you look at it, bridging loans are far more flexible than regular sources of funding. In the first place, traditional lenders will require a lot of information and paperwork before agreeing to consider your loan application, whereas a bridging loan lender will only need to know about your property investment and its potential, as this will be used to secure against the loan you are requesting. 

Additionally, some lenders may be willing to amend the repayment terms to suit your situation; however, you should be able to pay off the loan within the stipulated period. 

Available for any kind of property investment

Unlike other forms of financing that can only be used for the purpose for which it was applied for, property development bridging loans can be used for virtually any type of property development. This means that you can use the funds for purchase any type of property, including buy to let, flats, houses, and commercial buildings. 

Can finance property auctions

The property market can be unpredictable at times. Sometimes, your choice property may not be on the open market, but under the auctioneer’s hammer, and where there is no ready cash, you may lose out, as auction processes are usually completed on the same day. 

A bridging loan company can help you complete the action process, when you win the bid and hold the property while you go and source for the needed funds, or you can agree on a repayment plan with the company so that the property transfers into your ownership immediately. 

Repayment and exit strategy

For your bridging loan application to be successful, you should be able to show a well thought out exit strategy. This is the plan that shows how you intend to repay the loan. Remember that a bridging loan is a short term instrument of development finance, which means you may not have too long to clear your debts. 

You can choose to pay interest on a regular basis during the term of the loan, or work out alternative repayment methods with the lender, but on the whole, your exit strategy will be instrumental in whether your loan is approved or not.