What can bridging loans be used for?

Added by Love Business East Midlands | 10 March 2014

UPDATED: 4 June 2014

Today bridging loans are being used more and more for commercial and professional uses, however the traditional use was to bridge between selling one house and buying another.

Bridging loans are available for a wide variety of uses. Whether its investing in a business opportunity where raising the capital via a conventional loan would mean risking missing out or buying property at auction where obtaining a mortgage is not possible. Property investment, buy-to-let and development are also common reasons people use bridging loans.

Here are the most common types of bridging loans

Classic Bridging Loans

The traditional use of bridging is when it acts as a metaphorical bridge between selling one house and buying another. It is relevant when a buyer wants to buy a new home before they have completed the sale on their current property.

Debt Bridging Loans

Bridging can be appropriate for individuals who have a huge cost that needs paying immediately such as an unexpected VAT bill. These individuals are asset rich but cash poor, and have viable repayment solutions in the coming months. See asset finance.

Rescue Bridging Loans

Since the economic downturn, bridging loans have been used to help fund investors with a property portfolio who have had finance suddenly removed by banks. Bridging can quickly step into the breach so investors don’t lose their properties and have time to find alternative finance.

Loan to Value Bridging Loans

Where a property such as a repossession or auction finance is needed because a property is being purchased at a price below that which could normally be achieved in the open market, some bridge lenders will consider lending on the value of the property rather than the purchase price and thus increasing the loan size that may otherwise have been available.

Property Development Finance

Property Development finance and loans are provided for property developers and private builders for the purpose of refurbishment, conversion or new build.

Refurbishment Bridging Loans

Investors looking to purchase derelict properties will struggle to get mortgages from mainstream lenders. Bridging can be used to buy the property and complete the necessary renovations before moving to a standard mortgage – often referred to as development finance.

Medium Bridging Loans

Two or three-year loans have become more common in recent years although some people dispute whether these can be classed as bridging. They can be slightly cheaper and offer clients more time to refinance on to mainstream mortgages.

Call 0845 6181901 for a free consultation to explore the opportunities available to you.

Redrock Commercial Finance – Specialists in fast track bridging and commercial bridging loans

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