Bridging Finance

Reasons why Bridging Loans or Short-term Finance maybe useful to you

Although bridging loans and short-term finance is more expensive than conventional lending secured against property or land which we’d obtain for you via a residential or buy-to-let mortgage or bank loan, a bridging loan will offer you many advantages for a situation where you feel you don’t want to lose out on an opportunity. Some typical examples of where ACC Associates can assist you with bridging loans and short-term finance are as follows:

• Auction Purchase: When buying a property at an auction, there are usually strict completion deadlines of 28 days, with a deposit of 10% being paid on the day of the auction. In many cases it may not be possible to obtain a conventional residential or buy-to-let mortgage in such a short space of time. As a bridging loan can be arranged quickly (often within 7 to 10 days or less), we can ensure you avoid unnecessary stress and ensure you complete on time. Once the property has been purchased using the bridging loan or short-term finance, we can arrange a conventional residential or buy-to-let mortgage for you to refinance and repay the bridging finance or short-term loan.
• Below Market Value Purchase or Discounted Purchase: If you have been able to negotiate or locate a property being sold at a discount from it’s real value (known as Open Market Value or OMV) then it is possible the person selling is in need of a speedy completion due to financial difficulties and the possibility of a repossession taking place. The person may also just want to sell quickly to take advantage of another financial opportunity. In this situation it is possible to arrange a bridging loan or short-term finance that is based on the Open Market Value of the property and not the price you are buying at. This could result in the discounted purchase price reducing the amount of cash deposit required to put into the deal in order to complete and can be very attractive to investors and developers. The bridging loan or short-term finance will usually be repaid after 6 months via a remortgage to a conventional mortgage or the sale of the property.
• Broken Chain: You have found your dream home, you have either not sold your existing home or perhaps you have lost your buyer due to someone in the chain withdrawing from their sale and/or purchase. To avoid the potential stress of losing your dream home you could take advantage of a bridging loan or short-term finance which will enable you to complete on the purchase of your new home or buy to let investment, then repay the bridging finance when your existing home sells.
• Property Requires Work/Retention: If a property requires work to be completed in order for it to be deemed habitable (this could include a kitchen or bathroom amongst other things), then a conventional lender will not lend until the work is completed (this is known as a Retention). It is possible to arrange a bridging loan or short-term finance on a property in need of such works. Once the necessary work is completed, the property can either be refinanced to a conventional residential or buy to let mortgage or sold to repay the bridging loan or short-term finance.

As mentioned above, bridging loans or short-term finance is just that – a short-term form of funding and is more expensive compared to a conventional residential or investment mortgage. Because of this it is essential you have a clear exit strategy to ensure the bridging loan or short-term finance can be repaid to avoid rising costs. That said, it could be an ideal form of your financial planning to help ensure you achieve your goals when looking at the bigger picture.

What do I do next to obtain a bridging loan or short-term finance?

Call us on (01249) 599019 to start your search and take advantage of your ACC Associates broker service.

Bridging loans will be referred to an Intermediary Partner who can provide advice in this area.