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When Do I Need Bridging Finance?

If you are planning to buy a property with a tight purchase deadline, a bridging loan could be a suitable option for you. Bridging loan providers accept different types of properties such as residential, BTL for commercial, HMO, and short-term lets. The critical factor would be to get the timing of the application process right, to meet the given deadline. A mortgage adviser on your side would make it possible as they know the best bridging loan providers in the market.

How to buy my house with a bridging loan?

A bridging loan provides you with the opportunity to buy the dream property as a cash buyer in a quick time. You have more flexibility with the bridging loans. Most high-street lenders would not provide a bridge to you as there is more risk involved in the transaction. It has opened up the chances for specialist lenders to cater to the market with attractive bridging deal options.  

If you are thinking about whether you can purchase a property that doesn’t yet have planning permission, the answer is, yes you can still secure a bridging loan to buy the dream property.

What can I use the bridging loan for?

Bridging loans are known as adaptable short-term finance. You can use it for different purposes,

  • If you are a home-mover and planning to buy a new home before the current property is sold, a bridging loan would be a suitable option for you– When you have an existing residential property with a mortgage, the maximum loan amount affordability on the new property purchase would be affected. This is the main reason why home-movers either sell or rent out the existing property on a BTL mortgage. In case if you are planning to sell the existing property, and the expected price is not met, the sale would be delayed. A bridging loan can be used to arrange the finance for the new purchase in such an event.  
  • Landlords who need to buy an investment property quickly- There is a huge demand for properties with high rental income and reasonable market prices. It creates a lot of competition among the home buyers which includes portfolio landlords, commercial buyers, and owner-occupiers. You might need to place the offer with the seller in advance to get the offer accepted. The timing would be the turning point here and a bridge could be arranged in quick time compared to a standard mortgage.    
  • Buying property at auction– Auction properties have a requirement to complete payment within 28 days. It makes life difficult, for you as a standard mortgage application in the UK would take more than four weeks to complete. A bridge loan arrangement could be the ideal solution here as it could be arranged to meet the auction purchase deadline.
  • Personal cash flow circumstances- If you have cash limitations for personal matters, a bridging loan could still be used to overcome the shortfall. The provider would review the existing credit profile to make the decision on the amount of loan to be granted. If you are applying for cash to overcome cash-flow difficulties, lenders might have strict underwriting to assess such applicants.
  • To refurbish properties– If you have moved out of your family home to refurbish it before selling, a bridging loan would be a suitable solution for you to source funds for the refurbishment. The builders quote their charges and the loan provider would check the information from the external parties. The bridging loan providers would be able to arrange for the required funds to be met

Key features of a bridging loan

  • Bridging loans are designed for short-term purposes

Mortgages are designed for long-term property finance, with terms usually ranging from 20 to 35 years. A bridging loan is specifically designed for the short term: usually, a regulated bridging loan has a term of 12 months. The term could be changed based on the type of bridge and your circumstances.

  • Temporarily “bridge” the gap when there is a shortfall in funding

The core idea of a bridge is to temporarily “bridge” the gap when there is a shortfall in funding, between the deadline for completion on a purchase and the sale of a previous home. It could also be to buy a property that doesn’t qualify for a mortgage from an auction. , you could do the refurbishment and apply for a mortgage to refinance later or sell.  

  • Bridging loan to rescue a purchase when a buyer pulls out

When your offer has been accepted to buy a new home, there is still potential for the seller to pull out from the deal due to the long processing time taken by the buyers to process the funds via a mortgage. If the seller is in need of quick cash inflow, and the mortgage is taking time, he might consider pulling out. This is where a buyer could make a quick decision to use a bridging loan.

Overall, specialist mortgage advisers provide bridging finance guidance as they know the market and recent changes well. You could gain an advantage by having mortgage advice by your side to arrange bridging finance. They will assess both the pros and cons of applying for a bridging loan and recommend you a suitable financial outcome.

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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