One of the biggest points of appeal with bridging finance is the way in which they can be used for almost anything. If you meet the eligibility requirements set out by the lender, the funds are yours to do with as you wish.
Unlike a conventional mortgage or commercial loan, very few restrictions are placed on uses for bridging loans.
However, the vast majority of bridging loans are taken out with one of several popular applications in mind. As things stand today, these are the five most popular uses for bridging finance in the United Kingdom:
1. Purchasing Properties Fast in Time-Critical Situations
On average, it takes as long as 130 days to process and complete a conventional mortgage. By contrast, a bridging loan can be authorised and accessed within a few working days. This has made bridging finance a lifeline for many thousands of homebuyers and investors, looking to purchase properties before being beaten to the punch.
In time critical situations, there are few facilities available that are faster or more convenient than bridging finance.
2. Buying and Selling Properties for Capital Gains
The speed at which average property prices are growing in all regions of the UK is phenomenal. Average prices are up more than 13% compared to the same time last year, enabling savvy investors to generate huge profits. A bridging loan can be used to purchase a property, carry out the work necessary to boost its value and resell it at a higher price.
After which, the bridging loan can be repaid in full (plus minimal borrowing costs) and the remaining profits held on to.
3. Funding Conversions or Refurbishment Projects
Bridging finance can also be used to fund all types of conversions, extensions and refurbishment projects. Open to homeowners, investors and commercial borrowers, a bridging loan provides fast-access capital to cover the costs of all types of property improvements. Again, this provides property owners with the opportunity to conduct moderate or major renovations, before selling their home at a much higher price.
Refurbishments commonly covered by bridging finance include loft conversions, new kitchens, construction of garages, outbuilding construction and so on.
4. Business Capital
Owners of small and large businesses alike often run into unexpected cash flow issues at the worst possible time; precisely where bridging finance can help, the ideal facility for ‘bridging’ temporary gaps at an affordable price.
Typical applications within this bracket include starting new businesses, expanding a current enterprise or paying tax bills to avoid major penalties.
Bridging finance is also a popular choice for refinancing existing loans. Where short-term repayment is a viable option, using a bridging loan to pay off a longer-term debt can lead to significant savings.
It can also be a flexible and accessible facility for short-term consolidation of other outgoings. However, it is important to discuss your financial situation at length with an experienced broker if considering the use of bridging finance to pay off other debts.
Speak to a Whole of Market broker such as UK Property Finance to discuss your requirements.