Bridging finance is a useful lending option for those seeking to purchase property, as it provides rapid access to funds to avoid missing out on opportunities. These loans offer an interim finance solution lasting between 3 and 12 months and are secured by the property to bridge the gap between buying and selling.
Bridging loans have become increasingly popular among home buyers who need to move quickly after finding their desired property. These loans are now considered a mainstream financing option, and many buyers use them to facilitate their house purchase. In this article, we will explore how you can get a fast bridging loan to buy a property.
Buying A House With Bridging Loan
A bridging loan can provide a speedy solution when you need to act fast, enabling you to function as a cash buyer. This loan option is flexible, as it is secured against the value of the physical property, making it feasible for borrowers with less-than-perfect credit scores to be considered by lenders. Moreover, regulated bridging loans are suitable for various property types, including commercial and residential properties, building plots, and even undeveloped land without planning permission.
Process For Securing A Bridging Loan
Obtaining bridging finance for a property purchase is a straightforward and efficient process. You can secure bridging finance for your property purchase by following these steps:
Choose A Lender
With the increasing bridging loan demand, the number of bridging lenders is also increased. So you must shop around and choose a lender to make an online application.
Provide All The Necessary Information
To obtain a bridging loan, the borrower must furnish the lender with all required information, including personal details, the desired loan amount, security particulars, and the type of loan required, whether regulated or unregulated. The applicant is expected to be truthful and open while providing this information; providing false information can result in legal consequences.
Define the Rationale For Securing a Loan And Exit Plan
The applicant should explicitly state the reason for seeking the bridging loan UK, such as the intended property purchase and how they plan to utilize the funds. Additionally, it’s crucial to clearly define the exit strategy to the bridging lender, including how the loan will be repaid. For instance, if the plan is to sell the existing property to settle the loan, this should be communicated to the lender. This information can help the lender understand the repayment plan and make an informed decision.
Loan Terms
Upon receiving the necessary information from the applicant, the lender will provide the applicant with the loan terms and conditions and a quote outlining the associated costs.
Lender’s Decision In Principle
Engaging a bridging finance broker can be useful in identifying the best bridging lenders and deals that offer affordable rates. Once a suitable specialist bridging lender is identified, the lender will issue a document of approval, known as a Decision in Principle. This document confirms that the lender is willing to provide the requested loan amount based on the information provided by the applicant.
Client Confirmation
Once the applicant receives the Decision in Principle from the lender, they can notify the lender of their intent to proceed with the loan application.
Valuation
Specialist bridging finance brokers can engage an expert surveyor to assess the property’s value and provide an estimate to the lender.
Lender’s Confirmation
Once the surveyor’s report is obtained, the bridging finance provider will submit it to their credit team to verify that the requested loan amount is suitable based on the property’s assessed value.
Legal Documentation
Once all the necessary evidence is gathered, the solicitors will prepare legal documents that need to be signed by the applicant.
Funds Released
The funds are released upon the applicant’s signing and return of the legal documents. The time it takes to secure the funds may vary depending on the lender and the applicant’s circumstances.
How Does a Bridging Loan Can Be Used To Purchase A Property
Bridging loans can be utilized in various property purchase scenarios, including:
- Purchasing a new property before selling your existing property
- Purchasing property at an auction
- Resolving a property chain break
- Buying an investment property
- Purchasing an unmortgageable property.
Purchasing A Property Before The Sale Of Existing One
Bridging loans can assist in purchasing a new property before selling an existing one. This loan provides rapid funding for new property purchases, even if the current property has not yet been sold. Bridging loans are beneficial in scenarios such as upsizing, downsizing, moving in with a relative, or relocating abroad.
Buying A Property At Auction
Winning a bid at an auction typically requires an immediate 10% deposit, with the remaining 90% due within 20 days. Bridging finance can provide quick funds for this purpose, as traditional mortgages are long-term loans and cannot be arranged quickly enough.
Fixing Property Chain Breaks
Bridging loans can resolve property chain breaks. If you wish to purchase your dream home but face a property chain break, you can utilize bridging finance to buy your new home and repay the loan once your existing property is sold. Similarly, if the property you intend to purchase already has an outstanding mortgage, you can use bridging loans to pay off and settle the bridging loan when you sell your current property.
Purchasing An Unmortgageable Property
Bridging and peer-to-peer lending can provide funding for property purchases declined by traditional lenders. It includes properties with low valuations, structural issues, uninhabitable or in a state of disrepair.
Buying An Investment Property
Bridging finance can benefit property investors who want to take advantage of opportunities to purchase properties quickly and at affordable rates, ensuring that they don’t miss out on a potentially profitable investment.
Conclusion
Bridging finance is a loan option that allows individuals to access funds quickly when buying property. It is secured against physical property and is a flexible option, making it suitable for borrowers with less-than-perfect credit scores. Securing a bridging loan involves choosing a lender, providing necessary information, defining the rationale for securing the loan and the exit plan, agreeing on loan terms, and receiving the lender’s decision in principle.
A valuation and legal documentation are prepared before the funds are released. Bridging loans can be used to purchase a property before selling an existing one, at an auction, resolving a property chain break, buying an investment property, and purchasing an unmortgageable property.
