Bridging finance is loan advanced for a short period of time. The repayment period for this kind of loan is usually 12 months. The loans are meant for debt consolidation, office refurbishment and purchase of property. It is important to point out that the finance option is meant for both small scale property developer and large scale property developer.
The difference between this finance option and other forms of finance is that it is rather. This type of finance is commonly used in property purchase. Some of the uses of this form of finance include auctions though a number of developers use it to secure a parcel of land before they are developed.
Ardent property developers keep watch of potential, great deals pertaining to a lucrative land. The value of land can be low at the time of purchase, but with proper development, the potential value of the land can go up. The scenario is common in urban areas such as in Manchester or London. This is so because of the land scarcity that hinders new developments in land.
It is the value of such type of land that make the developers take the appropriate action swiftly in order to secure it before rival developer get hold of the parcel of land. Traditional methods of getting money such as mortgages and loans are very slow and does not provide a guarantee to the individuals interested in raising money. Therefore, many developers have resorted to raising money by this form of finance that is faster and promising.
Another beauty associated with the finance option is its flexibility. This form of finance is normally used in development projects whereas the traditional finance options such as loans are use to purchase land. It is imperative for one to bear in mind that the finance option is not a foundation but a bridge. They are used temporarily to fund projects.
It is also necessary to point out that traditional finance options like loan is difficult to get since the credit worthiness of the applicant is determined. On the other hand, this is uncommon phenomenon with the bridging finance.
Many developers usually use bridging finance to secure a piece of land. They are usually compelled to put in place adequate plans in order to get planning permission and subsequently have a mortgage that is a long term financial remedy to the developers. The mortgage allows developers to reclaim their development costs, and repay bridging loan.
One should not shy away from taking the finance source when in dire need of securing a property. However, it is important for a person applying for the loan that the loans that are non-status have to undergo valuation for 80% loan. It can be extended to 100% if the applicant have additional security, or want to purchase a property at a price below the market value.
If a person has identified a piece of land in any location, the loan can be a solution to difficulties in purchasing the land.
Jacob Pettit is a financial advisor specialising in short term finance. He is also a father who loves to spend time with his family. When he is not involved in doing business he likes to take his wife and children camping. He writes articles on various interesting topics related to finance, especially bridging finance.