To counter delays caused by long-term lenders
Many borrowers use a bridging loan because they are fast. Traditional lending is a long process. In many cases, it can take up to 130 days – even for a seemingly simple application. With such a large amount of time spent waiting for funds, this delay can put the borrower’s residential purchase at risk of falling through, or open to gazumping tactics from other buyers.
To purchase new build investments
Buying new build properties is particularly popular with overseas clients. The period of exchanging and completing on a new build is generally set by the developer and is often around 2 weeks. This puts the borrower at risk of losing their deposit. A bridging loan is usually required when the buyer is not able to secure the funds by the set completion date.
To buy a property at auction
Auctions can be a great place to look for good value properties, whether it be residential or commercial. Auctions are also popular for those looking to work on refurbishment projects, so that they can redecorate, refurbish then resell the property for a potential profit. Auction finance is designed to move quickly, as auction houses usually provide a tight completion window, averaging only 28 days.
To release funds for other ventures
If you, or a client of yours, is looking to expand their property portfolio, a bridging loan can be a short-term finance solution for purchasing commercial assets. Much like with residential properties, this is usually due to the speed in which funds can be deployed. The buyer can secure their bridging loan on a residential asset in order to release funds to purchase a commercial asset. There is however also the option to look at a commercial bridging loan, which can allow the investor to complete without the worry of the sale falling through, by securing the bridging loan against the commercial asset being purchased.