Bridging finance arranges large sums of money to be borrowed within a short period of time. The repayment period may vary between six to twelve months and the finance is usually provided to help purchase property.Bridging Finance is ideal for a home owner who has yet to receive payment form the sale of their home and whishes to purchases a new property. Bridging finance ensures that you do not miss out on a deal simply because there was no cash at that point of time. Moreover it provides an easy and fast approach to processing and makes bridging finance a popular choice.
There are two types of bridging finance:
Closed bridging finance – where the lender and borrower settle a certain date in the future for the repayment of the loan amount and this agreement is backed by legal contracts. This type of bridging finance is secured for lenders and is usually given for a purchase of a property.
Open bridging finance – do not define a date for repayment and the amount may be used for other purposes other than purchasing a property.
Benefits of bridging finance:
Speed of processing: Bridging finance may be raised within a few hours Compared with other types of finances may require anywhere between two to three months. The process of availing bridging finance is similar to a regular mortgage procedure, except different steps are carried out in parallel order to help speed up the process.
Condition of security: Property that can require renovation or is incomplete for living may be kept as security for bridging finance. This allows the owner to complete any pending jobs and renovation work with the loan and refinance for the property.
Flexibility: Funds received from open bridging finance may be utilised for any purpose including renovation, vacation, auction financing, debt consolidation, building a new construction or sponsoring higher education. This may be ideal when you require money urgently but it is locked in assets. Bridging finance lets you spend now and repay later when funds are available.
Eligibility: A borrower with good credit history, that can provide details of income and assets to lenders, may benefit from bridging finance with better terms and rates. These types of bridging loans are called Full Status. A borrower with an adverse credit history can also benefit bridging finance but at higher rates and more stringent terms. People from wide age groups, professions and with varied credit histories are eligible for bridging finance.
Large finance: Depending on the type and value of property offered as security, duration of loan and credit history of the borrower, bridging finance can offer a large amount of money within very short period. The lender also takes into consideration if the security offered is 1st or 2nd charge while deciding the sanctioned amount.
Bridging finance is not offered by all banks or financial institutions. Many lenders perceive it as a risky move. So it is not easy to find a good professional organisation offering bridging finance at competitive rates. Most lenders tend to charge high rates of interest. Good professional lenders not only have rational charges but also help borrowers with all paper work.
Author Resource:-
Rebecca Darbyshire shares some advantages of Bridging Finance.
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