There are many reasons why a borrower would go to a bridging loan lender instead of a bank.
The main reason a borrower would use a bridging loan lender is that the lenders are able to provide access to capital quickly and are willing to offer loans to people and projects considered high risk and have been turned down by conventional lenders such as banks.
In the following, we will breakdown some different reasons borrowers decide to get finance from a bridging lender.
A Borrower Wants to Buy a New Home
When money is required quickly to pay a deposit on a new home before the current home gets sold then a bridging loan will fit your needs, this is known as “bridge the gap”, You can get the money within a week if required and on a short term basis. The loan will be fast and flexible, and the interest rates can be reasonable.
A Borrower’s Home is Getting Repossessed
If the borrowers home is getting repossessed and is unable to sell it in time, then a bridging loan will help in this scenario as the finance can buy the house from the bank and then have the time needed to make the sale. Once it’s sold the money can repay the bridging loan lender. It is straightforward, and the lender will work in the time required.
The Borrower Has Some Credit Issues
Conventional lenders will want to see a good credit history in most cases and frown on lousy credit scores. On the other hand, Bridging loan lenders in most cases will overlook the credit history as long as you have enough equity in the property you want to give up as security against the loan.
One must be careful here as the lender may give a much lower LTV, and the interest may be higher than usual.
RELATED: Bridging Loans for Bad Credit
The Borrower is Self Employed
If the borrower is self-employed, he may not have a steady income, and this can be a problem for many conventional lenders. Bridging loan lenders will look at other factors such as the security against the loan and your overall income. You may not even have to pay monthly interest, instead, have the interest rolled or deferred.
The Borrower Wants to Buy a Property at an Auction
If the borrower wants to buy at auction money is needed quickly, and conventional lenders such as banks and building societies are not able to meet this demand. Typically at an auction, a 10% deposit is required immediately, and then you have 28 days t pay the rest of the finance. Bridging loans can be processed in 2 weeks, giving you plenty of time to pay the auction in time and then when long term finance is set the bridging loan can be paid off.
The Borrower Wants to Buy an Uninhabitable Property
A conventional lender will not lend on a property that has no functional bathroom or kitchen; this is where bridging loans come in, you can buy the property fix it up and then seek long term finance or a sale to repay the loan.
RELATED: Bridging Loans for Refurbishment
The Borrower Wants to Develop a Property
Property development is typically short term and as such conventional lenders do not finance short term property development. A bridging loan lender will have no problem to finance such a project as long as the developer meets specific criteria; it can be a viable solution. There is also specialised finance available such as development finance for these types of projects.
The Borrower has too Many Investment Properties
Conventional lenders may have a problem if you have too many mortgages on different properties, and this will be a block in getting another property. Bridging lenders will look at the overall picture, and as long as you have security that meets the loan, you will not have a problem in getting a bridging loan.
The Borrower Has Business and Has a Shortfall on Paying his VAT
Bridging loans are useful for businesses who need access to fast capital to pay off a VAT bill. Business loans offered by banks and other conventional lenders may not lend to pay off debts; they much prefer lending on expansion or stock. The bridging loan lender can in some cases take the businesses assets as security, and this may include warehouse, machines and industrial equipment.
The Borrower Has Been Recently Discharged From Bankruptcy
Conventional lenders frown on people who have had a bankruptcy in the past, and getting a loan from them can be next to impossible.
The bridging lender will look at the overall picture and take into consideration the security against the loan as the primary determining factor.
The Borrower Wants a Simplified Process
The borrower may want to take short term finance with a simple process and get access to money fast as in business may want to buy stock for Christmas but does not have the cash flow. The banks can take weeks to process and ask for a complicated array of documents which may be too late for the business.
At Property Finance Partners, we have access to whole market lenders (private money lenders). We can package your deal very quickly and efficiently, ensuring it will be a success. As opposed to conventional lenders such as the banks who say no we say yes. Contact us at 020 3393-9277 and find out what we can do for you today.