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Bridging Loans - What They Are and How They Can Help You

A bridging loan is a short term type of loan. While their primary use is in real estate purchases, they are also often sought in emergency or pressing situations where funds are needed in a hurry. Since these are practically secured loans, that means a professionally assessed and valued asset are used as collateral or security for the loans.

Typically, real property is used as security for a bridging loan, and it can be either residential or commercial, and in the form of property or developments. A combination of residential and commercial properties can also be used, as can offices, land, and even retail locations. So it is clear that in order to obtain a bridging loan, you have to own some property for use as security.

The amount you can borrow varies but is usually between 30,000 and 10,000,000. It is however, limited to a standard base line percentage of the property that is being used to secure the loan. This means that it is based on the market value that is assessed on the security being used. For residential it is typically around 85%, undeveloped land it is around 70% and for commercial it is around 65%. If additional securities are added to the collateral, then these percentages may change.

You may apply for bridging loans for a variety of reasons. You could be buying an auctioned property, or buying a new property when you are still waiting for funding to come from the sale of current holdings. You could also need it for investing in land, or you might use a loan for for debt consolidation, renovations, investments in property, and business funding, among other things. You can also use bridging loans to finance commercial property purchases.

Bridging loans are costly, so be ready to pay some additional money for this type of short-term borrowing. The cost is varied, typically depending on the kind of property and your credit rating. If you have poor credit, you will have to pay more, but usually between 1% and 2.0%. There will generally be an arrangement fee and a valuation fee associated with your bridging loan. These fees may vary depending on the value of the property.

You can obtain bridging loans from high street lenders or from specialist lenders. Specialist lenders may be able to offer you better rates on bridging loans than high street lenders but you should research both options to find the best one for you.

Bridging loans are short term loans with a typical duration of about six months. That means you will have to repay the loan in full within that time frame. There are some options available that will allow you to have the loan period run for as long as necessary.

In essence, bridging loans offer short-term financing for urgent situations, like buying property or to release equity on existing property quickly. You must own property to use as security if you plan on applying for a bridging loan.

Article Source: http://www.articleadventure.com

If you need short term finance then check out Alan Harding's website for more information on bridging loans

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