The use of bridging loan gives a positive benefit to the borrower unlike other types of finances. A bridging loan is designed as a short-term product and it represents an effective method of financing. Whether to financing a property or developing a project, this type of loan is very useful. However, the benefits of a bridge loan depend on the cases. a bridge loan can be arranged for a short time with flexible terms. The borrower does not need to have an extensive background and credit checks. The lender will consider using most of the property as security and it is another benefit of a bridge loan.
you may use it for:
1. Property purchase
It is good to have a property as an investment, especially when it comes at a bargain price. Your funds are tied up in other property investment and in this case, a bridge loan can be the solution for you. You have an option to sell the current property quickly to pay back the bridging loan, except if you desire to develop the property further. Whatever you desire to do, the fast purchasing property problem has been solved.
2. Avoiding repossession
The lender repossesses a property when he wants to settle an outstanding mortgage. He will sell a property cheaply to get a fast money. When the lender cannot cover the full debt amount, a bridge loan will be a solution to pay off a secured loan. The property can be sold at a profit to pay back a bridge loan. At least the owner could retain his remaining equity.
3. Buying property in an auction
Winning bid on a property auction asks you to deposit 10% on the same day to secure the bid. The rest of money should be paid for the rest of 28 days. It means you have 28 days to arrange a bridge loan solution. For some cases, the borrower should pay the balance sooner. The lender will work quickly to ensure your funds could be released on time.
4. Solving the Cash Flow Problems
If your business will face cash flow problems. You can use a bridge loan to assist your cash flow and not struggle with the bank calls.
5. Developing the Property
In the UK, an ideal solution for property development is through a bridging loan service. You may use it to fund a project and pay it back after the work is completed or when the property has been resold.
6. Paying tax
You are going to need a larger amount because of your taxes and it means you need fast money. It is a bad day to negotiate with the government and the only solution is by getting a bridge loan. You do not need to worry about the late tax payment because a bridge loan could close the gap when you need the money and the time to have it.
7. Buying a property below the market value
Although there is a property sale below the market value, you cannot do anything if you do not have money. Therefore, a bridge lender will help you to get the money fast and buy the property quickly.
8. Renovation, conversion, and refurbishment of the property
When you are in a poor state of condition and you want to restore, renovate, or convert a property, You need a fund support. Perhaps you want to add a bathroom to a property, you may ask for a bridge loan. Before the owner can refinance the property or sell it to get profit, a bridge loan will be a solution to cover the cost of short-term renovation.
9. Buy to get purchase
It is an example of using a bridge loan to get regular benefits. You can buy a home in order to rent it out because you want to get the benefits in the future. However, you do not have the cash on hand. Therefore, to afford the new property, let a bridge loan to help you. begin it with paying back right away after you get the rent payment from the new tenant. This is a simple method to buy more property although your assets are tied up or when it is not liquid enough to purchase the home in cash.
10. Placing your place in sale chain
It means you do not need to worry when the prospective buyer of your property changes his mind at the last minute. If you think you lose your prospective buyer, a bridge loan helps you to bridge the gap and your place will be safe in the sale chain.
Rules on Bridging Loans
There are certain rules and regulations on Bridging Loans and when you are borrowing it for your private home or residential property the lender must be FCA regulated and if they are not then you can make a complaint to the Financial Ombudsman service here.
Conclusion:
The use of bridging loan is useful and gives you many benefits. It is quick and very flexible. If you usually need some weeks or months to gain access to some money, a bridge loan will give you access in less than 48 hours in some cases. As long as you have a sufficient equity in the property to be used as security, you will get the funds fast.
In addition, a bridge loan is very flexible because it does not care about the borrower’s credit rating and background of life. Even if the borrower is a self-employed monthly income, as long as you can pay the money back, you will get a bridge loan. A bridge loan considers the condition of the mortgage even it is in a poor condition. Not only about the property, the lender will consider the tent of the property too. You may find that is difficult to get a loan in the poor property condition, especially when there is unusual construction or non-standard properties. However, it does not apply for a bridge loan because no matter your house construction is, you will get the loan. Not only for a single property, having multiple properties as security is probably to do, especially because of a bridge loan will be easily raised with two or more properties as security. A borrower can use the money to raise the funds for the developing project.