Bridging finance products are a relatively unknown and complicated area of property finance but once understood it can be easy to see that the facility provided has many benefits over traditional forms of finance provided by the high-street banks.
So what are bridging loans? Bridging loans are financial products used mainly by property developers as a short-term facility that can be actioned quickly to raise finance on a property asset. The loan is usually secured as a first or second charge on the asset in question and should only be obtained for a short-time period with a clear cut exit to repay the loan.
Bridging facility products can be far more riskier and cost a lot more to take out than high street finance and most people go down the bridging finance route when their banks simply will not lend on the terms they wish, bad credit situation, or if you want to buy a poor condition below market value property for a property investment for which you would be unable to get a high-street mortgage.
Bridging products are offered as a loan against the value (LTV) of your property, with most companies offering the facility at 85-75% of market value. Most of the largest principle lenders in the UK can provide as low as £25, 000 with a view to lending maximum £25 million for the right project.
Bridging finance is provided from private clients funds usually from principle lenders in the UK, the top firms have vast funds for bridging and are usually backed by large institutions, wealthy high-net individuals or commercial banks.
Most bridging lenders will pick and choose what they will lend against and for how much they are willing to lend. Some lenders will only lend within the prime spots in the area. (major cities and metropolitan centres). So now we know the answer to the question what are bridging loans, we need to find a summary of what can they be used for.