Bridging finance is an ideal mode of lending for buying property. For purchasing property, you need funds instantly; bridging loans offer you quick funding so that the opportunity cannot be skipped.
Bridging finance provides an interim finance solution for 1 to 12 months. They are secured against property and are used to bridge the gap between buying and selling.
Process for getting Bridging loans for buying property
The process for securing bridging finance for property purchase is seamless and efficient. You can get bridging finance for buying property by following these steps:
Provide basic information: The borrower is supposed to provide all necessary information to the lender containing personal information, desired loan amount, security details, and type of loan, whether regulated or unregulated. The applicant needs to be transparent and honest while providing this information; otherwise, legal action can be taken against him for providing the wrong information.
Define rationale for taking loan and exit plan
The applicant should clearly state the rationale for taking out the loan; what is the purpose of taking out this loan, and which property purchase do you intend to carry on if you manage to secure this loan? Also, clearly define your exit strategy to the bridging lender so that he can clearly understand how you will manage to repay, e.g., selling your existing property to repay the loan.
Loan terms: Loan terms and conditions are sent to the applicant along with a quote for the costs you will have to pay.
Bridging Lender’s Decision in Principle: Bridging finance brokers can facilitate finding the best bridging lender and deals at affordable rates.
The specialist bridging lender provides a document of approval (Decision in Principle) to show that he is willing to give the loan size based on their information.
Client confirmation: After receiving a Decision in Principle from the lender, the applicant notifies the lender that he wants to proceed with the loan application.
Valuation: With the help of an expert surveyor, specialist bridging finance brokers take an estimate of your property value and send it to the lender.
Lender confirmation: The bridging loan providers will forward the surveyor’s report to their credit community team for proof that the loan is an appropriate size based on your property’s value.
Legal documentation: After gathering all proofs, legal documents are sent by the solicitors to be signed by the applicant.
Funds released: The funds are released right after you sign and return the documents.
The time from application submission to securing funds depends on the lender and your circumstances; therefore, it varies.
How bridging loans can be used for property purchase
Bridging loans can be used for different property purchase scenarios.
- Purchasing a new property before selling your existing property
- Purchasing property at an auction
- Fixing property chain break
- Buying an investment property
- Purchasing unmortgageable property
Purchasing property before selling an existing property
Bridging loans can help you buy property before selling your current property. They can provide you quick funding for new property purchases even if your existing property has not been sold, for instance, in the scenarios like upsizing, downsizing, moving to a relative, or moving abroad.
Purchasing Property at an Auction
If you win a bid at an auction, you need to deposit a 10% amount instantly, and the remaining 90% has to be deposited within 20 days. Such quick funds can be arranged through bridging finance. Quick funds cannot be arranged with traditional mortgages as they are long-term loans.
Fixing Property Chain Breaks
Bridging loans fix a chain break. If you want to buy your dream home, you can purchase your new home with funds collected through bridging finance and repay the loan when your home is sold.
If the house you want to purchase is already on the mortgage, you can take out bridging loans to pay off the mortgage and repay the bridging loan by selling your existing property.
Buying an Investment Property
Bridging finance can be helpful for investors in buying properties quickly at affordable rates so that a good opportunity cannot be missed.
Purchasing an unmortgage-able property
Bridging loans/p2p lending offer finance for purchasing the properties for which traditional loan is declined, e.g., the properties valued under £50,000, with structural issues and uninhabitable or dilapidated properties.
Why are bridging loans perfect for purchasing property?
Bridging loans/p2p lending are considered perfect for purchasing a property because of the following reasons:
- They offer flexible loan terms, and the borrowers with bad credit may also get bridging loans conditionally
- They provide quick access to funds and can be arranged quickly
- They are short-term; a large amount of loan is granted for a shorter-term duration
- There are no early repayment and exit fees.
- They can be secured against any property type, whether commercial or residential, including unmortgageable, dilapidated, building plots, land without planning permissions, etc.
Bridging loans are considered perfect for purchasing a property of any type.