Bridging loans have seen steady growth over the last few years, mainly due to traditional lenders such as banks and building societies having more stringent processes and criteria around mortgage lending.
So how can a bridging loan help your clients? It can help in many ways, but predominantly it finds its niche within the property market.
Is there anyone who hasn't heard of someone's house sale falling through at the eleventh hour, everything all packed up and ready to go, completion date agreed, removal firm booked and then suddenly the chain breaks. This can often signify disaster and set things back dramatically, sometimes even stopping the whole process in its tracks. This can be downright costly and infuriating for the parties involved. But there is a solution on offer, a bridging loan can reinstate the chain for some people. They can use a bridging loan to fund the tied up equity in their property to still allow them to move and once the property has sold again they can repay the bridging loan.
People looking to buy another property who have to complete within weeks to ensure their offer is accepted, often come up against problems as they often can't sell their existing property within the timeframes given, this again is where a bridging loan could help. It enables people to buy a new property before selling their existing property. They know they can get a mortgage on the new property as they have lots of equity in their existing property, however they need to borrow the full purchase price to complete on time and they can't source it through traditional channels due to their income not being high enough. This is where a bridging loan would help. They can have the required funds to complete the sale within the timescales given and pay it back when they sell their existing property as this will release the equity and the new mortgage will fund the difference.
Capital raising for businesses can often take longer than expected, if the client owns his commercial property and needs a rapid cash injection a bridging loan can be a great solution to this, it enables the funds to be released when required whilst the remortgage is still being processed.
Clients buying properties at auction need access to funds, sometimes their existing lenders can't complete the funds release on time and this can result in clients losing their deposits and the property. A bridging loan can be arranged in hours and the funds released in days, this often proves to be a great product when clients find themselves in this position
Buy-to-let investors can often come up against frustrating requirements from traditional lenders. A bridging loan can speed the whole process up and often allow them to purchase properties which no mainstream lender would fund. They can buy unmortgageable properties, derelict properties and blocks of flats and then refurbish these properties to either sell on or to install tenants.
These are just a few examples of when a bridging loan fits the bill.