How Are UK Bridging Loans Used?
The events of the past couple of years have had a profound effect on the way UK customers seek financial support. Businesses and private borrowers alike have been flocking to the doors of bridging loan lenders, having found their products and services more flexible and affordable than conventional High Street loans.
Bridging loans are strictly short-term in nature, they can be arranged within a few working days and there are no restrictions placed on how the funds can be used. They can also be accessed by almost anyone with viable security for the loan, and a workable exit strategy.
But what are the most common uses for UK bridging loans today? How are the many thousands of people taking out bridging loans using them?
1. Purchasing Investment Properties
The single most common use for UK bridging loans is purchasing investment properties. This has remained the top application for bridging finance for some time, as prospective buyers scramble to get ahead of competing bidders. The more difficult it becomes to buy homes (and some types of business properties) via the open market, the greater the appeal of purchasing properties as a cash buyer.
2. Buying Homes and Other Items at Auction
One of the biggest benefits of bridging finance is the speed with which the facility can be arranged. This makes it ideal for auction property purchases and picking up other high-value items at auction (like cars or business machinery). Auction purchases need to be paid for in full within 28 days – most bridging loans can be organized and accessed in no longer than two weeks.
3. Funding Light and Heavy Refurbishments
Bridging finance can also be a great way to cover the costs of minor and major property improvements, prior to listing it for sale. Homeowners and investors looking to get the best possible prices for their properties will often conduct pre-sale renovations. With bridging finance, even the most extensive and ambitious renovations can be conducted at short notice and the loan repaid a few months later when the property is sold.
4. Fixing Broken Property Chains
This refers to any instance where the purchase of a property on the traditional open market falls through and time is a factor. For example, a traditional mortgage application could be declined; an agreed sale on your home falls through when the buyer pulls out. In such instances, bridging finance can be taken out to quickly and affordably purchase your next home. After which, your previous property can be left on the market for as long as it takes to sell for its full asking price.
5. Short-Term Business Expenses
SMEs in particular are susceptible to occasional cash flow issues. From purchasing essential stock to paying staff to funding repairs and equipment replacements, bridging finance covers all short-term requirements. All with monthly interest starting from as little as 0.5% and with comparatively few associated borrowing costs.
6. Purchasing Properties that Cannot Be Mortgaged
Conventional mortgages are issued on the basis of highly restrictive terms and conditions. One of which is that the property the mortgage is taken out against must be in a suitable state of repair and habitable at the time of the loan application. This makes it practically impossible to use conventional mortgages to fund the purchase of run-down, dilapidated and general ‘fixer-upper’ properties. Bridging finance, by contrast, can be taken out to fund the purchase of any type of property in any condition.
For more information on any of the above or to discuss the benefits of bridging loans in more detail, contact a member of the team at UK Bridging Loans for an obligation-free consultation.