In the simplest terms a Bridging Loan is a typically short-term facility to provide capital in situations where there is a time lag between the purchase of one asset and the sale of another. It enables the borrower to buy before they can sell. This is especially useful in the property market, where chains and auctions can mean promising opportunities are time sensitive.
Usually, bridging loans are used when the borrower wants to secure a new property but they have not yet sold their existing property. Most vendors will not accept an offer without proof of funds so if the existing property is still on the market, you are unlikely to have the necessary liquidity to make an acceptable offer and you may miss out on a great opportunity just because of a short delay in the timing of your asset sale.
Bridging loans are also useful when purchasing property at auction, where completion deadlines are usually short and the property purchased may not be suitable as security. Bridging finance can be very useful to short-term development projects, where a property is only likely to remain in the name of the developer for a short period.
The essence of the transaction is that your existing asset is used as security for the bridging loan. This is possible even if your asset is held under legal charge (mortgaged) by another lender, providing enough equity (value of the asset minus existing loan) is available. If the equity is inadequate, the provider of the bridging loan will also take a legal charge over the asset being acquired.
Once the new asset is acquired, you will be the owner of both assets but you will also be responsible for servicing any debt attached to them. This may mean paying two or more mortgages. Therefore it is vital that your exit strategy is short term whether it’s the sale of the first asset, or for example the renting out of a previously marketed unsold property and the conversion of the bridging facility to a more traditional repayment mortgage.
At Rapid Bridging we will support you throughout the journey and we will work with you to help you build a strong exit strategy.
Think carefully before securing other debts against your home. your home may be repossessed if you do not keep up repayments on a mortgageREQUEST A CALLBACK
When you need to raise money from property or land you own, a residential bridging loan can help you:
We’ll arrange your residential bridging loan quickly and easily.