Bridging finance was once seen as a facility open exclusively to experienced investors and commercial borrowers. Today, more mainstream customers are exploring the benefits of bridging finance than ever before.
In particular, homeowners looking to purchase properties (either for relocation or investment purposes) are turning to bridging loans. But what are the benefits of bridging finance that go beyond those of conventional mortgages?
How do you stand to benefit by taking out a bridging loan to pay for your next home?
Fast Access to Funds
One of the biggest benefits of bridging finance is the speed at which the facility can be arranged. If you find your dream home at a price you can afford, a bridging home could be taken out to buy it for cash in a matter of days. Bridging finance effectively turns you into a cash buyer, giving you a major advantage over competing bidders. Not to mention, the potential to access significant savings – property transactions for cash is almost always significantly cheaper.
Flexible Qualification Criteria
Being turned down for a mortgage can be a nightmare scenario. Unfortunately, it is also the everyday reality many thousands of would-be homebuyers are facing. If you have even the slightest ‘blip’ on your credit history, you have little to no chance of qualifying for a mortgage. Meanwhile, bridging finance specialists are much more flexible about qualification criteria. Bridging loans are issued on the basis of security (collateral) and a viable exit strategy – not the usual ‘binary’ credit checks. Even if you have been turned down for several mortgages, you could still qualify for affordable bridging finance.
The Option to Buy an ‘Unmortgageable’ Property
With average house prices hovering at around £300,000, more prospective buyers than ever before are setting their sights on fixer-upper homes, sadly almost all mainstream lenders are unwilling to lend against homes that are not considered habitable at the time of the application. This closes the door to buying these ‘unmortgageable’ properties for cheap, before renovating and improving them. Bridging finance by contrast, can be used to purchase any type of property in any condition.
Auction Property Purchases
Likewise, it is not uncommon for homes in a poor state of repair to sell at auction for less than £50,000. Where property owners need to sell their homes as quickly as possible, they often do so at auction at heavily discounted rates; purchasing properties at auction means coming up with full payment for the lot within 28 days, this is impossible with any conventional mortgage, but straightforward with fast-access bridging finance. Most bridging loans can be organised within a few working days when all required paperwork and documentation are in place.
The Opportunity to Save by Repaying Early
Most top-rated bridging loan specialists encourage their customers to repay their loans early. Rather than punishing them with penalties and elevated interest rates, they afford savings to those who complete their transactions ahead of time. With monthly interest on bridging finance starting from around 0.5%, it can all add up to a uniquely cost-effective way to purchase a property.
Escape the Traditional Property Chain
Property chains are becoming increasingly long, complex and fragile. Buyers and sellers are reliant on each other to enable their own transactions and a single broken link in the chain can bring the whole thing crashing down. With bridging finance, buyers have the opportunity to escape the conventional property chain entirely. No risk of being gazumped, no need to rush through the sale of their current home and no risk of seeing their dream property slip through their fingers at an unbeatable price.