Today, we take a look at four of the biggest misconceptions about bridging loans:
Myth 1: Bridging finance has limited practical applications
The most common application for a bridging loan is to purchase a property at short notice; whether for chain break purposes or to pick up a bargain property at auction, most bridging loans are issued with property purchase intent in mind.
But this does not mean that bridging loans can only be used for a handful of fairly similar purposes. Bridging finance can be used for any legal purpose whatsoever. Examples of which include funding emergency repairs, settling urgent tax bills, covering the costs of renovations and so on.
Quite the opposite of limited applications, bridging finance has the potential to be one of the most flexible and dynamic funding solutions available.
Myth 2: Bridging finance is too expensive
Where bridging loans are repaid promptly, they can also be uniquely cost-effective; interest rates can start from as little as 0.43% per month
Bridging finance only becomes expensive when loans are not repaid within the agreed period of time. Overall borrowing costs can be just as competitive as those that apply to conventional loans. Repaying a bridging loan early can save the borrower even more money, with no excessive fees and penalties payable.
Myth 3: Bridging finance is complicated to arrange
One of the primary points of appeal with bridging finance is its speed and simplicity. Particularly when compared to a conventional mortgage organising a bridging loan can be surprisingly simple.
The average completion time on a bridging loan is around two weeks, though it is often possible to access the funds required in a matter of days. Where significant sums of money are needed at short notice, nothing is quicker or more convenient than a bridging loan.
Ensuring you have the appropriate paperwork in order is essential to facilitate a smooth and simple application process. This is one of the areas in which independent broker support can prove invaluable, while at the same time help ensure you get the best possible deal.
Myth 4: Bridging loans are a last resort
Bridging finance is becoming a first resort option for borrowers in need of flexible, fast-access funding.
As major banks and lenders make it increasingly difficult to qualify for conventional products, the bridging sector is attracting record interest from businesses and private applicants alike.
In time-critical situations a bridging loan could be the only realistic option for securing the funds needed in the required timeframe; even when alternative funding solutions are available, bridging finance could still prove to be the most convenient and cost-effective option.
For more information on any of the above or to discuss the benefits of bridging finance in more detail, contact a member of the team at UK Property Finance today.