What REALLY is bridging finance?
By Bridging Loan Directory -
For most intermediaries bridging finance is a niche area they are aware of but would rarely think of using it for their clients.
If the recent media reports are to be believed, the bridging market is worth north of £1billion per year and growing, yet the vast majority of intermediaries have never completed a bridging deal.
For the “regular” mortgage broker who sees FTB’s and standard remortgages day in day out, he will rarely see a genuine bridging opportunity.
For those who cast their net further into the wider sea of general financial services, there is a world of opportunity awaiting them that bridging finance could well be the answer too.
So, as the title of the piece asks, what REALLY is bridging finance? Bridging Finance can be best summed up as a short term loan, typically repayable over 1 to 12 months, secured against residential or commercial property.
It can create new income streams for you and provide quick solutions for your clients. You can become part of a growing sector and therefore attract new clients.
When can I use bridging finance?
There are an inordinate number of scenario’s when bridging finance can be used, but below are just a few that should hopefully whet the appetite
Chain breaks – The classic bridge. When the purchaser of your main residence pulls out at the last minute and you need to complete in the purchase of your new property, a bridging loan can be used to complete the transaction until another buyer is found.
Auction purchases – When your client has successfully bought a property from auction, they typically have 28 days to come up with the rest of the funds after having put down 10% on the day.
Most high street banks and building societies are unable to provide funds within that timeframe (especially of the property is deemed uninhabitable), bridging finance often completes in a matter of days as opposed to weeks.
Renovation projects – Your client may own or wish to purchase a property that they wish to convert into flats. Bridging finance can be used to help assist with both purchase and renovation costs when the client needs to move quickly.
HMRC – Often clients can do everything to avoid paying the tax man, but there comes a point where cash is needed very quickly to pay the government to avoid “further action”.
Money can be raised quickly as a first or second charge on residential property for a short period of time whilst more suitable longer term options are investigated.
The list doesn’t end there. Divorce payouts, divorce legal costs, inheritance tax issues, development projects, business investment and overseas investment have all been legitimate uses of bridging finance which have been secured on residential or commercial property for a period of no longer than 12 months.
Bridging finance isn’t for everyone, but with an open mind and a determination to not say no to your client, it could very well be the answer you are looking for.
Sales & Marketing Director, Masthaven Bridging Finance