Best Commercial Finance

Bridging finance is used as a short term loan to bridge the gap when a property currently owned is still awaiting completion of the sale, but the owner wishes to purchase their new property immediately. Usually bridging finance will be offered at a slightly higher interest rate than normal borrowing, and will be of a fixed term.

Using bridging finance can be an expensive option; careful consideration of the costs involved should take place before making a commitment. Sometimes bridging finance will be unavoidable, in these situations the borrower will be facing losing the chance of procuring their new property if they wait for the completed sale of their old property. In times of a slackening property market, bridging finance can be the only option to make sure you can buy the new property you want within a decent amount of time.

What Kinds of Bridging Finance Are There?
Bridging finance comes in two distinctly different flavours. Borrowers who have already exchanged contracts on their existing property will be offered what is known as a “closed” bridge. It is not often that a property deal will turn sour once the exchange of contracts has taken place, so lenders see this as a fairly low risk form of loan. The second form of bridging finance is offered to people who have yet to sell their existing property, and is known as an “open” bridge, in this situation, the borrower may not have even placed their current property on the market, but wish to purchase their new one as soon as they can. If you are considering open bridging finance, you should be aware that lenders will want to see a lot of equity in your existing property, along with your plans for making repayments, and ensure that you have a plan in place should you run too full term without selling your current property.

If a borrower approaches a lender for open bridging finance, the lender is almost definitely going to want to see the actual details of the mortgage offer you have made on your target property. They will also more than likely require full details about the property, and require that you produce proof that your current property is being actively sold on the market. Additionally they will need you to prove that you are capable of making the repayments, and what kind of exit strategy you have in place should you reach full term without selling your property.

Bridging finance will almost always carry a higher rate of interest than a standard loan, and there will usually be some form of arrangement or setup fee involved. In certain cases you may be offered a choice of lower interest rate and increased fee, or lower fee and increased interest rate, deciding which would be best for you will depend upon how long you feel it is going to take to sell your existing property.

Bridging finance is often the ideal solution to a short term cashflow problem, taking professional advice from a commercial mortgage broker before talking up any form of bridging finance is recommended.