Property Bridging Finance: The Ins and Outs

financeProperty bridging finance has become one of the most in demand funding methods not just in the real estate world but in the finance sector in general. These short term loans bridge the gap between a deal and the main source of funds. Since real estate investments come with quite the value and the price tag, amassing enough resources to make a purchase can take some time and this applies both to income (e.g. proceeds from a sale of another property, salaries and wages, retained earnings, and savings) and credit sources E.g. bank loans and mortgages).

Now without ample funds, investors cannot research, let alone provide for the pre-purchase needs that come with acquiring a piece of real estate property. Security deposits and down payments are just some of the many.

There are two kinds of property bridging finance. The open bridge is the type where there is no fixed exit date for the borrower. It runs its course for a certain period but no particular date is stapled except that it would be the time by which the borrower’s main income and/or credit line have become available. The closed bridge on the other hand is where there is a stipulated and specific maturity date.

But like all other financing methods in the market, a bridge comes with its own set of ins and outs. Their application is, of course, depending on the variables at hand for every given user. We’ve listed them down below for everybody’s easy perusal.

WHAT’S IN?

They allow individuals and businesses to hasten an acquisition while a bigger valued credit option is still on its way.

It is a quick and convenient way to obtain immediate funds for short term liquidity needs in a property acquisition arrangement.

It allows owners to make use of the sale proceeds of old or redundant real estate assets to acquire new and/or better ones.

The method comes with lesser headache with its straightforward approach, lesser documentary requirements and a faster process.

WHAT’S NOT?

It comes with a stigma. Despite its prominence, a lot of people still do not have a clear understanding as to how property bridging finance works. It is technically a loan temporarily used in lieu of a permanent and bigger one. But in essence, the latter will be used to pay the former. Additionally, they can only work on a short term basis otherwise they won’t be effective anymore.



Property Bridging Finance Guide for the Newbie

Although there’s nothing wrong with being a newbie at something, it most definitely comes with a lot of work. Starting from scratch sure isn’t an easy road to tackle but we all begin here and there’s no shame in that. The only way is forward and that said here’s a guide on how you can navigate the jungle that is property bridging finance.

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What is it?

Property bridging finance is a short term or temporary loan taken out pending the availability of a bigger and long term financing (e.g. mortgage, proceeds from a sale, income and bank loan). It acts as a stop gap measure that connects short term liquidity and immediate needs and one’s main fund line that is yet to be available at a later date. It can also be referred to as a caveat or a swing loan.

What it does?

Essentially, property bridging finance is designed to cover the initial costs that come with acquiring real estate assets. Since this type of transaction requires several expenditures prior to and exempt from the list price, many buyers and investors find themselves having to lose out on several opportunities because of a timing constraint.

Let us not forget that coming up with adequate financial resources, especially one that’s enough to cover a hefty acquisition such as a property, takes considerable time. This applies to all sources be it income or credit. Where the former takes long to pool, the latter takes long to process and receive due to their often meticulous procedures and requirements.

That calls for some serious problems especially with regard to initial costs. Things like research costs, professional fees, survey expenses, security deposits and down payments all have to be funded for. Most if not all of them are upfront and pressing and without them, no asset acquisition shall transpire.

The role of property bridging finance is to provide for these and even up to the first few monthly installments on the remaining balance. This way, investors need not have to wait further or worse lose the deal to another interested party. What’s great is that it’s temporary in nature and lasts from two weeks to three years. Providers also allow for flexible repayment schemes where users have the liberty of closing the bridge prior to or at maturity whichever they find most suitable and appropriate to their means and situation.

http://www.alternativebridging.co.uk/




Things You May or May Not Know About Bridging Loans

loansBridging loans, have you heard about them? Although they’ve been around for a while, they’re still considered fairly new compared to most other methods of finance. This is also the reason why some people or even businesses find them confusing making them hesitant to use it even if it would have provided for the best solution to their needs.

To end that, we came up with a list of things you may or may not know (and should) about bridging loans. Read up and find out.

  • They work on the interim. They belong to this category of finance that acts as an adjoining agent between transactions. It is one taken out to provide for immediate short term liquidity needs while a permanent and often bigger finance is being arranged or is yet to be available at a later date. For example, they are taken out to pay for security deposit and/or down payment for a home while one’s mortgage is still on its way.
  • They are for short term use. Bridging loans are designed to work on the interim and are therefore short term borrowings with a period of only a few weeks to at most of three years. They should not in any way be used in place of a permanent financing as those often range from 3 years and above.
  • They allow for flexible payment. Users can repay and close the bridge in two ways. One is by paying for it prior to maturity. The second is waiting for maturity which is likewise the date by which one’s permanent financing becomes available.
  • They can be used without restrictions. Unlike most types of funding method in the market, this does not restrict use. Borrowers can therefore allocate and spend it in any way they wish and deem best. Of course, the wise use of such resources should always be a prime objective. It’s still a loan and wasting it isn’t anywhere near wise.
  • They minimize if not eliminate opportunity losses. Since bridging loans connect the gap between a need coming due and one’s permanent fund line, it not only helps hasten transactions but it likewise decreases the likelihood of opportunities lost and the costs that come with it. A good deal isn’t easy to come by so we all know very well how important it is to grab it when we can. A bridge helps us do so.


Commercial Bridging Finance Could Be Your Saving Grace

commercial bridging financeWe all know that buying any real estate property, especially a commercial one, is no joke. Not only are these assets more in demand but they tend to rake up some serious cash too. Not surprising as they are often situated in prime areas around town. Add in the factor of competition and things have blown up but not beyond any smart investor’s reach. They make use of a tool called Commercial Bridging Finance.

But what is commercial bridging finance? Simply put, it is a type of short term loan that bridges the gap between the pre-purchase costs and short term liquidity needs to the pending permanent and often bigger source of funding (e.g. mortgage, sales proceeds, bank loan, income, and etcetera). We all know that pooling a sum as huge to finance such an acquisition takes time either because the source needs to be pooled over a series of months or processing it is downright meticulous and sometimes even both.

So why not wait? Patience is a virtue but sometimes it’s not the best way to go especially when we’re talking about a commercial property that’s hot in the eyes of investors and buyers. A good asset won’t stay up for sale for a long time because people will want to grab the opportunity as quickly as they could.

If we don’t have the resources yet, how do we play the game? Do we just pass? Not necessarily because in business an opportunity lost can also mean financial losses. Since a commercial bridging finance was designed to cater to immediate and short term liquidity needs, it takes care of the pre-purchase costs or those expenses that need to be provided for to make the transaction happen.

Oftentimes, it covers the research expenses, the professional fees (e.g. lawyer, real estate agent and surveyor), the tax requirements and most importantly the security deposit and down payment which seals the deal. This way, the commercial asset is secured before anybody else.

So are we saying that a second loan must be had? Technically, a commercial bridging finance is another loan but it is short term in nature and is an interim method not a permanent and long term one. It spans only a couple of months to at most of two years until one’s permanent funding becomes available which at the same time will close and pay up for the bridge. Visit this website Alternative Bridging.




Property Bridging Finance: What You Should and Shouldn’t Do

property-bridging-financeReal estate is tricky and not to mention a lot of work. Moreover, it can be particularly hefty when we talk finances. For instance, there’s more to costs than just the asset’s price tag. Security deposits, down payment, research costs and professional fees form part of pre-acquisition disbursements. Luckily, there’s this thing we call property bridging finance.

This particular type of credit allows borrowers to take hold of immediate funds for their short term liquidity needs when permanent financing falls short on timing and availability. As a stop gap measure and interim fund, it has allowed investors to skip the opportunity risks and losses that would have otherwise been present.

But even such a powerful tool isn’t going to work and provide benefits if used incorrectly. It has been designed to fit specific uses and purposes after all. So what should we and should not do when utilizing property bridging finance? 

Understand how it works. Before even employing it, make sure to have understood and read up on how it works, what it entails and its limitations are. Is it even the right fit for your needs, case and capabilities? There are many available resources from books to magazines to online articles. One can even talk to an expert for guidance.

Never use it for what it’s not. A common mistake among borrowers is that they use property bridging finance in the long run to replace their permanent financing. This should not be the case as it is first and foremost designed to act as a temporary loan that fulfills short term liquidity needs. 

Budget and use the funds wisely. Money is not easy to come by and even if bridging loans are easier to process and are made available faster, this gives no one an excuse to use the cash haphazardly and irresponsibly. Allocate the resources wisely. Learn to prioritize and monitor expenditures. Veer away from wastage.

Never enter without an exit in mind. At the end of the day, property bridging finance is still a borrowing. As a liability, one has the legal obligation and responsibility to repay the provider as mandated in the terms and conditions of the contract signed. Providers offer users two options in terms of repayment either at maturity or prior to maturity. Regardless of the liberty enjoyed, one must still map out an exit route and plan ahead of time so that closing the bridge won’t be any hassle or budensome.

Find out more at this page, http://www.alternativebridging.co.uk/development/