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.

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