Bridging finance continues to grow in popularity with UK property investors and developers.
Demand for bridging loans jumped by 14% last year to £716.2m, the highest figure for three years “as transactions bounced back to pre-pandemic levels,” says bridging lender MT Finance.
With this increase in demand, many of our clients want to know what the obvious pros and cons of are bridging finance, we’ve done our best to detail some of the key points in our article below:
Bridging Finance Pros:
Speed: Bridging finance can be arranged quickly, often in a matter of days or weeks, making it an ideal solution for those who need to secure funding quickly.
Flexibility: Bridging loans can be used for a variety of purposes, including buying property, refurbishment, and development, making it a flexible form of finance.
Access to finance: Bridging finance can provide access to funds that might not be available through traditional lending channels.
Short-term funding: Bridging finance is typically provided for a short-term period, usually up to 12 months, which can be useful for those who only need funding for a short period.
Bridging Finance Cons:
Cost: Bridging finance can be expensive, with interest rates typically higher than those charged by traditional lenders. There may also be additional fees, such as arrangement fees and exit fees.
Risk: Bridging finance is often considered to be a high-risk form of finance. If the borrower is unable to repay the loan, the lender may take possession of the property used as security.
Complex: Bridging finance can be complex, with many different options and structures available. It is essential to seek professional advice to ensure that the bridging loan is structured appropriately and that the borrower fully understands the terms and conditions of the complex bridging loan.
Short-term funding: While short-term funding can be beneficial in some circumstances, it may not be suitable for all borrowers. If the borrower is unable to repay the loan at the end of the term, they may need to refinance or sell the property used as security.
Overall, bridging finance can be a useful tool for those who need to secure funding quickly or who need access to funds that might not be available through traditional lending channels. However, it is important to carefully consider the costs and risks involved and to seek professional advice before taking out a bridging loan.
We invite you to get in touch with our experienced bridging finance brokers who can evaluate your circumstances, understand your needs and advise you on the best solution.
To discuss a bridging loan, touch with us on 020 3645 4322 or use the form on our contact page to request a call back.