Commercial Bridging Finance
Bridging finance is an extremely flexible tool for raising money for a variety of uses but is not as well known or understood as standard mortgage products. Just like a standard mortgage, the loan is secured on your property (or the property that you want to buy), but on a much shorter term – 12 months maximum term if you live in, or intend to live in the property; or up to 24 months on a property which is purely for investment purposes.
There are two types of bridging loans:
- Closed bridge: The borrower has a set date when the loan will be repaid. For example, the borrower has already exchanged to sell a property and the completion date has been fixed. The sale of that property will repay the bridging loan.
- Open bridge: The borrower sets out a proposed exit plan to repay their loan but there is no definitive date at the outset. There will be a clear cut-off point that the loan must be repaid by.
When to use a bridging loan
- Quickly securing a property: People can buy a new property before selling an existing one to prevent them from missing out on a property they want to purchase.
- Chain breaks: The loan can prevent a homeowner from missing out on purchasing their new home if a buyer in a property chain drops out.
- Downsizing: These property owners do not require mortgages, and can use a bridging loan to buy before the sale of their existing property so they can move quickly and miss out on their desired property
- Property conversions: For people wanting to live in peace and tranquillity in the countryside or for developers looking to turn a profit.
- Auction Finance: For people buying a property at auction, bridging finance can allow them to pay the required percentage needed as a deposit and then complete the transaction in the time provided for by the auction contract.
FOR PROPERTY INVESTORS
- Un-mortgageable properties: Bridging loans can also be used by people fixing up dilapidated properties, where traditional mortgages would not be approved, for example, where properties have no bathrooms, toilets, or kitchens.
- Renovation and development: The funding option can be used by those wanting to renovate a property, or those wanting to develop a piece of land into one house or even multiple houses.
- Quick access to funds: Bridging loans can be used to take advantage of market conditions and discounted investment opportunities, helping to finalise negotiations so that those opportunities are not missed.
- Raising capital: Bridging loans can be secured against land and property so that companies can raise the sums of money needed in a short timeframe, for example, buying stock as an alternative to asset purchase finance.
- Tax liabilities: Businesses can use bridging loans if a tax demand is made, and the amount cannot otherwise be accessed within the required timeframe.
Meet business obligations: Borrowers looking for short term funding to meet business obligations and payments or overcome financial difficulties can use a bridging loan as a possible option.
MFS work alongside a number of trusted partners and master brokers in order to source the most suitable deal for you. After an initial consultation, and with your permission, your details will be passed to the master broker who can best fulfill your needs and they will guide you through the process to completion.