If you think raising funds is a challenge, choosing a type of finance is equally as tricky. Apart from there being tons of options in the market, identifying which one would best suit your need takes a lot of research and caution. If you’re looking at property bridging finance then you’re in luck. Today, we give you a glimpse as to how it works, what it’s used for and what its perks are.
What is it?
By definition, property bridging finance is a type of interim financing that provides for bridge loans. These are temporary borrowings taken out pending the availability of a permanent and often bigger financing such as a mortgage, a bank loan or proceeds from a sale.
How is it used?
As its name suggests, property bridging finance is used on the interim. It seeks to provide for immediate short term liquidity needs and in the case of real estate acquisitions, these are those pre-purchase expenses that are vital to the transaction and without which would not make it possible. To site some examples, it is often used to fund for the research costs, the professional fees paid to agents, brokers, lawyers or solicitors, the security deposit and the down payment.
A bridge lasts for only a short amount of time unlike its permanent counterparts. It spans from a few weeks to three years at most. As for the repayment procedures, borrowers have two options of doing so. They can close it prior to maturity thereby reducing interest expenses and they can also do so at maturity which is often the date by which permanent financing becomes available.
What benefits does it bring?
When we speak benefits or perks, property bridging finance has got a lot to boast. First of all, it’s faster and easier to process. Since it was designed to work on the interim, providers make sure that cash release only takes days to a few weeks. Plus, there aren’t as many documentary requirements to provide.
Moreover, property bridging finance allows investors and buyers to acquire the assets they’ve been eyeing on immediately. This cuts off the waiting time which only heightens the risks of losing the opportunity. As we all know, prime assets do not stay in the market for long as people will want to snatch a great deal the moment the spot one. So in essence, it is a tool that helps reduce if not eliminates opportunity costs.