If you are thinking of moving house, and need a loan to ‘bridge the gap’ between selling one home and buying another, Bridging Finance could be a perfect choice. It will provide you with the funds you need to purchase a new property before your existing one has sold, so you can escape any mortgage chains and snap up your dream home as if you were a cash buyer.
There are many ways you can use bridging finance to buy a property in the UK, as we’ll explain in this complete guide to bridging loans for real estate investments.
What Is Bridging Finance?
Bridging finance (also referred to as a bridging loan) is a form of short-term, high-interest finance offered by various banks and lenders in the UK. Most commonly used by homeowners, landlords, and property developers, it helps people buy a new property before selling an existing one by bridging the financial gap between the two transactions.
Secured against property, bridging loans typically run for a maximum of 12-months, although some lenders do offer extensions if needed. The final repayment date may be fixed or open, depending on the bridging finance you choose, and you can generally pay the interest accrued monthly or at the end of the term of the loan.
Buying A Property With A Bridging Loan
Bridging finance is flexible and quick to arrange. Here are just a few ways how you can use it to buy a property in the UK:
Buying A New Property Before Your Existing One Has Sold
You can use a bridging loan to buy a new house, even if you are in a property chain and your current home has not yet sold. It will give you a cash lump sum to pay for your new property while giving you time to sell your existing home at the best price. You can use this type of short-term finance when upsizing, downsizing, or even moving overseas.
Buying Property At Auction
You can buy property at auction with bridging finance and take advantage of the vast savings available to cash buyers. Most property auctions require full payment within 28-days, making mortgage finance an impossible option, but with a bridging loan, you can make an offer on the spot, and secure your dream home for less.
Buying Business & Commercial Premises
Accessing funds for commercial premises can be time-consuming and costly in the UK, particularly if you do not have a substantial deposit. The good news is, you can use bridging finance to fund commercial property purchases, with some lenders offering bridging loans of up to £25m and repayment terms of up to three years.
Buying Building Plots & Land Without Planning Permission
You can use a land bridging loan to buy building plots or any piece of land, even if it doesn’t yet have planning permission. Farmers can purchase agricultural land in this way, even at auction, and property investors and property developers can use such loans to upgrade current investments or build new ones.
Buying Investment Properties
Bridging loans are ideal for landlords who want to buy an investment property quickly. They can use the funds to acquire new properties, refurbish existing ones, or expand their portfolio of buy-to-let homes and business premises without waiting for traditional mortgage lending to be approved.
Buy Your First Home
You can also use bridging finance to get your foot on the property ladder as a first-time buyer, although you may need to come up with a deposit. Lenders typically quote on a loan-to-value (LTV) rate and offer between 65% and 80% of the property value. However, there are ways around this, and if you have a concrete exit strategy, you may be able to secure a 100% bridging loan.
Speak to a bridging loan specialist or financial advisor for more information on how bridging finance can help you buy your next property.