Bridging loans can be obtained for a wide range of property development purposes, whether to purchase at auction or for funds for refurbishment, major development or conversion. Often these loans are obtained where finance is not freely available to fund a build or restoration. Bridging loans might also be used to raise the finance required to finalise a new property purchase, before the sale of another property has been completed. They could be arranged at very short notice and the lending criteria is fairly flexible making them an ideal choice for property developers.
Experienced developers are more likely to purchase properties that are derelict or in need of major refurbishment. Bridging finance could be ideal for purchasing properties in a state of disrepair. Traditional lenders are unlikely to provide finance for properties that are not habitable so a bridging loan could be an ideal solution. Once the development project is complete, the bridging loan could be repaid through either; sale of property or refinancing to a longer term more conventional mortgage.
Developers are also likely to attend property auctions to find suitable land or buildings to develop or refurbish. Bridging finance is a popular way of funding property auction purchases. It’s not always the case that individuals attending auctions have the funds readily available. short term loans have long been a popular source of funding at auctions.
A bridging loan can be obtained by consumers and organisations to purchase or refinance property or land and are typically best obtained via a broker who has access to a wide range of lenders. Bridging loans can be a niche market and not every mortgage adviser will be comfortable dealing with them. An adviser with previous bridging experience should be more likely to get you a better deal.
The amount of equity (or deposit) you have available could determine the amount of finance you are able to borrow, as loan to value will be a factor. If you are a property developer who works on developments to sell them on, a bridging loan may be the best way to fund your next purchase whilst your current properties are being sold. The money can be secured with a first charge or second charge loan. Once the development is complete and sold, the bridging loan would be repaid.