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.