Never forget the benefits of a bridging loan

Mortgage expert Mitesh Manek says ‘bridging loans’ are a great help to many people purchasing a property, whether they’re a new home owner or an experienced developer

Never forget the benefits of a bridging loan

When times are tough financially, many people forget about the benefits of using a ‘bridging loan’. These are short term loans used to help people ‘bridge a gap’ in their personal and/or family finances.

If funds are short, you can use a ‘bridging loan’ to purchase anything you require. One of the most frequent uses of a ‘bridging loan’ is to fund the purchase of a new home, before selling your current property.

Landlords, homeowners and property investors are regular users of such loans, and they are particularly popular with people investing in buy-to-let schemes. You can even use a ‘bridging loan’ to pay off a tax bill.

There are two types of ‘bridging loan’ – ‘Open’ and ‘Closed’. Without going into too much detail about them, an ‘Open’ loan has no fixed repayment date, and therefore can be paid off whenever funds become available. However, lenders do expect people to clear their debts within 12 months. 

A ‘Closed’ loan has a fixed repayment date. The date agreed usually corresponds to the time when the borrower expects to have more funds available to pay off the debt. ‘Closed’ loans are usually cheaper than ‘Open’ loans because there is less flexibility regarding repayment.

I have worked in the finance sector for almost 20 years, having started out as a mortgage adviser with HSBC. I worked for this multi-national giant for eight years before becoming a mortgage consultant. And my specialist area covers buy to let and residential mortgages.

Data forecasts show that agreed property sales in the UK for 2023 are likely to be the lowest they have been in more than a decade. And maybe this is partly because some people have forgotten about the benefits of taking on a ‘bridging loan’.

Such loans are a brilliant temporary solution for satisfying the financial gap between the sale of your existing property and the acquisition of a new one. Here are some advantages.

Speed and Agility: They offer a quick approval process, allowing you to pounce on time-sensitive investment opportunities, so you don’t miss out on lucrative deals.

Flexible Financing: Can be tailored to meet the unique needs of property investors. The flexibility of these loans is based on the available equity within your existing property.

Unlocking Equity: A ‘bridging loan’ empowers you to leverage equity tied up in your current property. They provide immediate access to funds required for financing new ventures. They can also be used to fund property regeneration.

Specific Benefits For Property Investors

Facilitate Quick Acquisitions: Allows you to seize time-sensitive investment opportunities by securing the necessary funds promptly.

Renovation and Improvement Projects: Immediate access to capital for property renovations or improvements, which will enhance the value of your investment.

Portfolio Diversification: Enable you to diversify your property portfolio efficiently, while optimising your investment strategy.

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