How Bridging Finance Can Help You Complete Dream Property Purchase Before You Sell Existing Property?
How would you feel when you spot your dream property, but you are not in a position to buy it? Perhaps you think about selling your existing home, but it is not selling as fast as you expect and you are unable to raise funds for the new property. This can be a stressful situation, and you may lose the property to another buyer if you fail to arrange funds on time. So, what do you do in such situation? The answer is simple – get a bridging loan.
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How Bridging Finance Can Help You Buy Your Dream House?
Unlike traditional bank loans that take weeks to process, bridging finance can be processed in a couple of days. When you obtain bridging loan, you can use that money to buy your dream property, and once your current home is sold, you can repay the loan along with the interest. It is a short-term loan that can be acquired for several months.
Earlier, it was difficult to find short-term financing solutions. Traditional lenders advise borrowers to sell the old property first or extend the settlement time. But, since the financial market has become extremely huge, it is easier to find bridging finance lenders. Let’s learn how a bridging loan can help you complete your dream home purchase.
#1 A bridging loan gets approved quickly
When you find a property you have been dreaming of, waiting for traditional mortgage approval may seem like a missing out on a chance to live in your dream home. One of the biggest advantages about bridging loans is the speed of approval what can otherwise be a very long process. If you wish you buy it before selling your existing home, bridging finance can help you complete property purchase faster. You can raise the finances in a matter of days compared to traditional loans that take weeks or months for approval.
#2 No restrictions on how you wish to utilize money
Another major benefit of bridging finance is that there are no restrictions on how you wish to use the funds. In the traditional mortgage loan, lenders may restrict using the allocated funds. If you are taking out a conventional loan for business purpose, you cannot use it for another purpose. But, with bridging finance, you can use it the way you want. You can buy your dream home, renovate your property or buy property at auction as long as you present how you are going to repay with a proper exit strategy.
#3 Flexible lending criteria
Bridging loans have easy lending criteria compared to traditional mortgages. Irrespective of the amount, borrowers can use bridging finance without any difficulty. Borrowers can apply for bridging loan even if they have a poor credit history, lack of income proof or have a history of bankruptcy. This flexibility is possible because these short-term loans are issued majorly based on security. There are no lengthy checks and bridging finance is secured against the value of your assets. If your assets hold sufficient value, the lender will issue up to 80% LTV. This makes bridging loan an ideal way to invest in a property when you are faced with difficult financial situations.
#4 You can also buy your dream property at auction
You can use a bridging loan to buy all kinds of properties, including residential, commercial or properties at auction. When you win the bid on your dream property at auction, you are supposed to pay 10% cost on the same day, and the remaining balance amount within 28 days. You can manage 10%, but it could get very difficult to manage the remaining 90% if you haven’t sold your existing property or mortgage hasn’t come through. Bridging loans can help you get access to the funds quickly while you wait for the sale of your current property.
#5 Flexible repayment options
Bridging finance also offers multiple repayment options, which make the repayments easier to manage than other traditional loans that have long-term monthly repayments. With bridging loans, interest can be either paid monthly or retained. You can choose to make monthly interest repayment or you can pay interest at the time you repay the loan when the term ends. When the situation is tight and you wait for the sale of your current property, monthly payments is the last thing you want to do.
#6 No gazumping in the buying process
Often sellers sell property at a higher price to another buyer even after they have already agreed to your offer just because you fail to make payment on time. Unfortunately, this is common and it is you who lose the property before contracts are exchanged. This makes the process of purchasing a house even more stressful. If you have been eyeing on a property and had an offer accepted, a bridging loan help can you complete your dream property deal quickly.
#7 Simple process
Depending on the equity available in your asset, bridging loans can allow you to release funds up to £250 million. Usually, the maximum amount you can access may be limited to 80% loan to value, which can be secured against one or multiple properties. When you work with experienced and professional bridging finance company, they make the process of arranging funds more efficient and faster than traditional mortgages.
Final Thoughts Before you opt for a bridging finance solution, do some research, get some bridging finance quote from the lenders and choose the one who offers the best rate and transparency throughout the process. Whether buying to-let property or a home for yourself, getting easy access to the funds you need to buy your dream property is much simpler and easier with bridging finance. From efficient application process to getting large sums of money, bridging loan can benefit you in more ways than one in your property buying journey. However, take a note that flexibility and speed comes at a price. Bridging loan interest rates are higher than traditional mortgages. Meaning, the longer you take to repay the loan, the more expensive it gets.