Tag: property bridging finance

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.


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.


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/