If you are looking to borrow some money, but do not want to face the long-term commitment of a loan or mortgage, then bridging finance may be a good option for you. Bridging finance, or a bridging loan, is a short-term financing option that is great if you need to borrow money quickly. Essentially it is a short-term loan that is designed to ‘bridge’ a period between two situations, typically the time between the purchase of a new property and the sale of another. Bridging loans are short term finance facilities, that can typically range anywhere between 1 month and 1 year depending on the situation and the lender. If you are looking to borrow a sum of money for your new property but are still waiting for your old property to sell, then here are the 7 benefits of bridging finance.
Quick to arrange
The first benefit that bridging finance has to offer is that they are relatively quick for a lender to arrange, meaning they are also quick for the borrower to secure. Bridging finance is unregulated finance meaning that without the regulatory burden, finance lenders are much more swift and agile when providing someone with a loan. Due to the quick pace of the lenders, a bridging loan can be secured by the borrower in just a matter of days. When applying for another loan or a mortgage, it can often take months to arrange the loan. This means that as a borrower, you will have to wait a long period of time to receive your loan which will delay the process of you buying your new property. This means that if you are looking for a quick loan of money or just want to move into your property quicker, a bridging loan is a great option for you.
Can be arranged for full price
As well as being quite quick to arrange and secure, bridging loans can also be arranged for full price. Although this may not be the case for all lenders, many lenders will offer you with 100% bridging loans. In order to receive the full price of the bridging loan that you apply for you must make sure that sufficient security is in place. A bridging loan is granted and secured against a property that you currently occupy, or against a property that you may occupy in the future. They can also be granted against a property of any member of immediate family of the person who is applying for the bridging loan.
All types of property can be used as security
As previously mentioned, bridging loans are provided to and secured by a borrower against their current property or one that they may occupy in the future. Essentially, the person who is applying for the loan current property is used as a security in order for them to receive their bridging loan. Therefore, the value of the loan that the borrower is provided with is based on the value of the property that is being used to secure the loan. A fantastic benefit of a bridging loan is that multiple properties can be used as security, meaning that no matter what type of property that you live in, you will be able to secure the loan.
Relaxed lending criteria
Seeing as a bridging loan is secured against a number of different types of property, it means that there are relaxed lending criteria involved. Using your property, or even number of properties, as a security to gain the loan means that the rest of the usual lending criteria that are involved in applying for a loan or mortgage are rendered obsolete. When applying for a loan or mortgage, you will have to provide your lender with a number of different things. These requirements typically include your credit score, proof of income and expenditure, as well as your current financial position. It can often be hard to provide all of this information and is usually very time consuming. When applying for a bridging loan you can skip over these requirements, saving a lot of time and stress for both you and your lender.
Low fees and interest rates
Another great benefit that bridging loans have to offer to borrowers is that they have low fees and interest rates when compared to other home loans or mortgages provided by lenders. Most bridging loans have low fees and interest rates due to how quickly they can be arranged and the short period of time in which the borrower has the loan for. Seeing as the borrow typically only has the loan for a few months, it means that it can be paid back just as quickly. Therefore, as an applicant for a bridging loan there is no need to worry about paying back high interest rates or any on-going annual or monthly fees. This is extremely beneficial as it allows you to save money that you can put towards other fees that you will need to pay in your new house.
Usually no exit fee
As well as having low interest rates and fees, bridging loans typically do not coming with any exit fees. When you apply and secure a home loan or mortgages, there are many fees that you may not be aware of, the main one being an exit fee. This is a fee that you have to pay when closing your mortgage account. You will have close your mortgage account when your either switch to another lender or decide that you want to re-mortgage your property to another deal, even if it is with the same lender or not. You will also have to pay a fee if you finish paying off your mortgage earlier than originally planned, whereas this is not the case with bridging loans. When you have finished paying off your bridging loan you can simply inform your lender and they will end your contract without any additional fees.
Can be arranged as 2nd or 3rd charge
The last benefit that bridging loans have to offer is that they can be arranged as a second or even a third a charge. This is extremly beneficial as many other loans or mortgages will only be accepted if they are a first charge. To put it simply, if you take out a bridging loan on your main property that already has a mortgage in place, the bridging loan will be classed as a second charge bridging loan. Seeing as bridging loans can be arranged as a second or even third charge, it means that they are a great option if you are a property developer or a landlord who buys multiple properties in order to sell them on or rent them out to other tenants. This also allows you to take out a number of bridging loans on a number of properties at the same time.
As you can see there are a number of different fantastic benefits that come with bridging finance and bridging loans. So, if you are looking to get a quick loan of money without the long-term commitment of a mortgage or another loan, then you should definitely consider applying for a bridging loan.