Bridging Finance

Bridging finance is a loan, generally for a short period of time to bridge a gap. A good example of when you may need to use bridging finance is when you are buying a new property and waiting for a traditional mortgage to be approved or capital to be released from the sale of their current home and have a short period of time to be “bridged”.

Although bridging finance loans are most commonly used to help fund a new house purchase while you’re waiting for your existing property to sell they can be used for a variety reasons such as major structural home improvements, renovation projects and lease extensions.

When getting a bridging loan, you need to show that you have a viable exit strategy. The usual exit strategy for landlords, for example, is to refinance the loan onto a buy-to-let mortgage.

What are the occasions when a Bridging Loan might be used?

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To buy at auction where you have a short timeframe to exchange contracts.

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Business cashflow problems

A short term way of easing the pressure on your business’s cashflow or working capital.
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Inheritance tax

When having to release charges on property and or to pay other beneficiaries without first selling the property
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Renovation purposes

If a property is unsuitable to reside in or to get a mortgage on, bridging finance can be secured against the property. Ideal if you’re a property developer who wants to buy a property, restore it and then sell it on.
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Repossession prevention

If your property is about to be repossessed, a bridging loan can be used to pay off the debt, passing control back to you (the owner of the property) so that you can sell it on your own terms and avoid a forced sale.

Is Bridging Finance expensive?

It is a common misconception that bridging finance is expensive, in fact it has got cheaper to secure this type of funding in recent years.

Bridging finance is a quick way to raise money because there are less questions asked by the lender than there are in your more conventional mortgage process, meaning it’s also used sometimes used to purchase property when there is a requirement for speed. But it is important to note, you will need a plan for exiting the loan, as it is seen as short-term funding only and usually up to 18 months only. The exit can be anything from the sale of the property or asset to raising finance from another source, such as getting a commercial or residential mortgage, against it.

Need more help or have any questions?

We need to be honest with you… Your home may be repossessed if you do not keep up repayments on your mortgage.