Bridging finance uses
Most commonly bridging loans are used to maintain a place in a sale chain. In these situations bridging finance is used to bridge a financial gap in order to complete on a purchase before funds have been received from the sale of another property. A bridging loan allows the sale to progress and is cleared once the other property has been sold.
Bridging loans are an excellent source of finance when funds are required quickly and are becoming more popular as a method of speeding up purchases when vendors are offering a reduced purchase price in exchange for a fast completion. Bridging loans can be set up in as little as 48 hours, although 5 to 7 days is normally required, bridging loans are still a very quick way to obtain finance.
When the condition of a property is poor, obtaining more traditional funds such as buy to let mortgages or commercial mortgages can be a problem as lenders may often refuse to lend or place inconvenient restrictions on a lending facility. Bridging finance is often used as a solution for funding secured on poor conditioned property, since the bridging loan providers are more flexible with regards to the condition of the property that is to be used as security for the bridging loan.
To be able to provide bridging loans quickly many bridging providers do not ask for income details or income proof. They are more concerned with how their bridging facility is going to be repaid, and since they are only short term facilities they do not have to consider how monthly interest repayments are going to be made or afforded in the long term.
Although bridging loans are often used to purchase property when funds are required quickly or for only a short term, they are also used to raise funds for almost any other reason. A great deal or investment opportunity may become available but in order to take advantage of the opportunity funds maybe required quickly. For these types of situations bridging loans are excellent because they can be set up quickly. Bridging finance is sometimes a back up option when other finance arrangements fail and a bridging loan is required to take its place. This is increasingly common since the credit crunch because many lenders are far more unpredictable than they used to be.