Whether you want to renovate the existing property, are looking to buy a property at an auction, or just want to bridge the gap while waiting to sell off the property, a bridge loan fiance is the ultimate choice.
Bridge loans are commonly for investment purposes and allow breathing space when one needs short-term cash. This is vital to securing a property at an auction.
What is bridge loan finance?
This form of financing is used to maintain momentum while purchasing an investment when personal funding is temporarily unavailable. It helps to bridge the gap between the total amount required and the amount of money that's currently available. bridge lending involves the borrowing of large sums in a short span of time.
How does bridge lending work?
Facing a temporary finance gap? Then, a bridging loan is a short-term loan that can help you a lot. This works either as a first or a second charge for the property. First charge is all about the bridge loan being the actual loan of the property. This means, when you are owning a house outright then the bridging loan is used for finishing off a renovation.
However, if you already have a mortgage, then that will be the first charge, and the second charge would be the bridge loan finance. This is the order in which the creditors require that you be repaid when you fail to keep up with the repayments.
How can you use the bridge loan?
It can be used for financing the purchase or renovation of business, commercial, or residential property. The bridge loan is an alternative to taking out a second mortgage or re-mortgaged the property.
Most of the time, the bridge loan is used to purchase a property via auction. This loan can come in handy, especially when you don't have the cash released from previous or any other investments. With a bridge loan, you can now proceed with purchasing a new property, and you don't have to wait for all the parties in the chain to exchange contracts.
One such example is when you are building a dream home from scratch. Consider a bridge loan that can be used for purchasing the land, paying less fees, and building materials until the mortgage funds come through.
Bridge loan lenders and companies
You will come across numerous companies offering bridge loans, and since large sums of money are involved, we suggest you carefully choose the lender and ensure that they are on par with your requirements.
Firstly, ensure that the financing company is a member of the FCA (Financial Conduct Authority). This assures that there won't be any complaints or issues that are managed according to the FCA guidelines.
Bad credit and bridge loans
If you have bad credit, then a bridge loan application can be a bit difficult, but it's not impossible. The credit ratings might affect whether your loan application will be affected or not, and they can also influence your fees along with the interest rate that's payable.
The good news is that there are many lenders and loan companies that specialise in providing bridge loans, even if you have bad credit.