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Could Bridging Loans Be The Answer To Your Cash Flow Problems?

Sep 3, 2008
Obtaining bridging loans is normally the result of needing to raise finance quickly and over a short period. Most people associate bridging loans with house buying. When either a homebuyer has found their ideal home but have not sold their existing property and rather than lose their dream home, take out an 'open bridge loan' to secure its purchase. Alternatively, should a homebuyer already have exchanged on the sale of their current property but have not completed, then a 'closed bridge loan' is offered.

However, bridging loans are not just used during the purchasing of homes but also for a variety of other reasons. It could be employed to pay for a once in a lifetime type holiday or a dream wedding. Maybe a large and unexpected bill has arrived and cash is needed urgently. Businesses occasionally take out bridging loans when a short-term injection of cash is required to level out funding differences. In addition, these loans are sometimes utilized as an element of development finance.

Basically, bridging loans are short term mortgages with the loan secured against your present property, regardless if it is residential or commercial. To successfully attain a bridging loan, you normally require plenty of equity in your property, (the value once all debts secured on it are cleared), to use as security or collateral. Even non-property assets may be employed for this purpose.

It can be possible to be granted a high percentage of LTV (Loan to Value) from a bridging loan. This is a factor drawn upon by some property investors. If the current market value rather than the purchasing price is applied when calculating, then it is possible to receive 100% of the purchase price if the property is bought at below market value.

Sourcing the marketplace to find bridging loans with the lowest interest rates and best terms, could be problematic especially as time is normally of the essence when seeking this type of finance. Drawing on the knowledge and expertise of a commercial mortgage broker could be the answer. They are often able to locate the most appropriate deal for your circumstances quickly and could negotiate better rates than if you approached the lenders yourself.

Even someone with a poor credit history, including County Court Judgements (CCJs) and mortgage arrears or a self-employed person with no accounts or any proof of income, could be helped to find a bridging loan.

Your request might be for a second or third charge on your property and you feel that your choice of lenders could be limited.

You might feel that the inclusion of a special clause is necessary, perhaps having the option to convert the bridging loan into a loan with longer terms. Perhaps being allowed to exercise early settlement on the loan and any charges associated with this action, to be kept to a minimum is important. Payment protection insurance might be appropriate but with inexpensive premiums. All these queries and requirements could be easily resolved and answered by using a commercial mortgage broker when seeking bridging loans.
About the Author
Sean Horton is a Director of Enhanced Wealth, a whole of market mortgage broker and IFA specialising in mortgage advice and the associated areas of income protection, mortgage protection, mortgage life cover and bridging loans .
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