Richmond Asset Finance are experts in the bridging loans and bridging finance market and we recognise that speed is often a priority with short-term funding requests.
What is a Bridging Loan?
A bridging loan is a short term lending solution often used by buy-to-let landlords, property developers and other property professionals to help them bridge the gap until longer term funding can be arranged or until a property is sold. Typically bridging finance can be taken from between 1-18 months.
The application process for a bridging loan is usually far simpler than for other types of borrowing and applications can complete very quickly, usually in 5-14 days.
Bridging finance can be offered against almost any property or land and can be used for a number of different reasons. The main uses for bridging loans are:
- Purchasing a property quickly – such as auction purchases
- Buying uninhabitable property
- Funding property restoration or conversion work
- Repossession prevention
- Buying property under market value
The pros and cons of bridging loans
Bridging loans are a very useful tool when looking to raise finance, but they can be riskier than other forms of finance. As such, it’s important to carefully consider your options before proceeding and specialist advice is always recommended. There are a number of pros and cons to consider before committing to a loan.
- Applications are usually completed in under 14 days, making them ideal when funds are needed quickly.
- As there are often no monthly repayments to make, bridging finance can be used to raise capital where cash flow is tight, but you have the assets to comfortably repay the loan.
- The bridging market is very competitive, and this is leading to a reduction in interest rates.
- Bridging loans can be used to purchase properties that would be ineligible for borrowing using other types of borrowing, such as property that is not habitable.
- Bridging loans are more expensive than traditional mortgages. Although rates are dropping, traditional mortgages are still by far the most economical option for most property transactions.
- As most loans are very short term, if you have problems with your chosen method of repayment, you can face major issues. Failure to repay the loan at the end of the term would eventually lead to repossession, and most likely significant costs.