When time is of the essence, traditional mortgage solutions aren’t always suitable. If you want to secure funds quickly or take advantage of a short-term opportunity, bridging finance could provide an alternative to slower standard lending processes.
However, not all loans of this type are the same and understanding the different options available is crucial if you want to maximise your chances of success.
Development
If you’re planning large-scale construction projects like building new homes or adding extensive renovations, a development bridging loan could give you quick access to funds so you can purchase the land and get started immediately.
One key benefit of this type of loan is flexibility. You can release funds in stages as you reach different milestones in your project, which can help manage cash flow.
Commercial
This type of bridging loan can be used to buy or refurbish commercial properties like offices, shops or warehouses, often when time is of the essence.
Unlike development finance, commercial bridging loans are usually shorter-term, so you’ll require a quick exit strategy, like securing a long-term commercial mortgage or selling.
Residential
Bridging finance is also a valuable tool for consumers who are buying or remortgaging a residential property and need fast funding. People often use a bridging mortgage to complete a house purchase before selling their existing home.
The process is straightforward, but make sure you have a firm idea of how you’ll repay the loan, either by selling or switching to a traditional mortgage once your financial situation stabilises.
Refurbishment
Bridging loans are frequently used to cover the costs of renovation before selling or refinancing, particularly for investors who want to add value to a building.
Because refurbishments can vary greatly in scope, lenders will assess the condition of the property, the scale of the work required and your plans for the finished project. To increase your chances of approval, ensure you have detailed cost estimates and a reliable timeline for completing the works.
Auction
This last type of bridging finance is a specialised loan for properties purchased at auction. If you’ve ever attended a property auction, you’ll know that you often must complete the transaction within 28 days, which can be difficult with traditional mortgages.
In this situation, a bridging loan can provide the necessary funds quickly, allowing you to secure the property and meet the auction deadline. Before attending the auction, ensure you’ve arranged a loan in principle and can provide a clear repayment plan.