Your safety net
Your safety net
In many ways, borrowing money in any situation is designed to ‘bridge’ a gap in order to complete financial transactions. However, the concept of bridging finance is still one that confuses and scares a lot of investors. It really shouldn’t.
When used under the right circumstances, bridging finance solutions can provide a safety net to keep your financial activities and investments running in a smooth fashion. Here’s a detailed overview of what you need to know about the processes involved.
Is Bridging Finance Safe?
The concept of bridging finance has a bad reputation among various audiences. In truth, those feelings aren’t completely unfounded, as the high interest agreements were once managed by fairly unethical lenders, the arena has evolved.
As popularity has grown, a number of reputable Bridging Finance lenders such as Active Mortgage have become open to using bridging financing agreements creating a significantly less volatile and harsh environment than yesteryear. When used in the right situations, bridging financing can be used to great effect.
When Can Bridging Financing Be Used?
Bridging finance agreements are primarily designed for property purchases. In truth, there are several situations in which they might be utilised, including:
- Waiting for payments to arrive from the sale of an existing property.
- To complete a property purchase and development project before a quick sale.
- For the development of an existing property before sale.
However, bridging loans and financing are increasingly used for other purposes such as business matters.
What Are The Two Types Of Bridge Finance Agreements?
If you’ve heard about bridge financing before, you’ve probably heard that there are two main categories. They are:
Open bridge – the borrower (you) will propose a repayment plan but there is no definitive date in place, although the lender will stipulate a final cut off date.
Closed bridge – the borrower (you) will agree to a set payment date and exit strategy. This is most likely when the sale of the existing property has already been agreed.
There is no one right or wrong answer and it largely comes down to personal situations. A financial advisor with expertise in bridging financing will be able to guide you through the process. Ordinarily, the maximum repayment time is 12 months.
How Much Can Be Borrowed Through Bridge Financing?
All lenders are unique, but most will operate with a minimum loan value of £10,000 and a maximum amount of £1,000,000. However, this will be reliant on several external factors including proof that you will be able to make the repayments once the property is sold (or the situation you are using the bridge for is finished).
On a separate note, the LTV value will be utilised during the calculations too. Lenders may take the true market value rather than the purchase price, which may allow you to borrow a little extra than you would through traditional lending. Still, given the high interest rates, you should only borrow what is needed to complete the proposed transactions.
If you are looking to get some Bridging Finance, then Active Mortgage are more than capable of helping. Please call 01245 850165 or contact us here for more information.
These articles are for information only and no advice should be conferred from the content within. Please seek independent financial advice prior to taking any action.
Want To Know More?
Are you ready? Find out today
Your dream home/new investment is waiting for you…