What is a Residential Investment Bridging Loan?

A residential bridging loan is a type of short-term, alternative finance that can be a valuable solution for you if you are looking for funds to invest in a property. It fills the financial gap and allows you to gap investment opportunities while waiting for long-term funds to become available. You can use it for a number of purposes, such as purchasing a new property, buying a property at auction, or renovating a home. If you go for a traditional mortgage, it can take a long time to secure funds, and you may lose the opportunity to purchase your dream property.

But before jumping into this financial solution, you need to do research and understand every bit of it. When taking out such a loan from any lender, you must know the loan terms and when they should be utilized.

Here in this guide, we are going to describe everything you need to know about residential investment bridging loans.

What Does Residential Bridging Loan Mean?

First of all, you need to understand what a residential bridging loan is before you apply for such a loan.

It is simply a funding solution that allows you to react to an opportunity and access quick funds to complete the purchase of a property. The loan terms usually range from 3 to 12 months, but some lenders allow you to take out loans for longer terms, such as 36 months. They can be the best alternative to traditional mortgages, which have rigid rules and take longer time to provide funds. The most significant benefit of bridging loans is that your application is typically turned around within a matter of days.

Residential bridging loans are secured types of loans, meaning you have to use your property as collateral. The loan amount is usually decided on the basis of the value of the property and your exit strategy. These loans are more flexible and accessible compared to traditional property loans. \

One thing that you need to keep in mind before taking out a loan is that the interest rate of bridging finance is higher than that of mortgage loans. You should take out a loan only when you can afford to repay it on time.

Reasons to Take Out Residential Bridging Loan

You can easily find specialist bridging loan providers and many p2p lending platforms offering residential bridging finance. Unlike mortgage lenders, they offer flexibility in terms of the use of these funds. Following are some most common reasons to use residential bridging funds:

• To get quick access to funds for property or business investment opportunities.

• You can use these funds to extend the lease of the property before the sale.

• To complete the purchase of a property at auction.

• To renovate a property and increase its value before the sale.

• To purchase a property before the sale of an existing one.

• To overcome business cash flow issues such as paying wages or purchasing new stock.

  
  

The uses of bridging loans are not limited, and you can use them for any legal reason. Lenders will not interfere as long as you are able to repay the loan.

When Is the Right Time To Take Out Residential Bridging Loan?

No matter how efficiently you manage your finances, there are many situations when you need financial support. Residential bridging finance helps you to overcome many financial issues. You can take out such a loan when you are in a property chain, and there is a risk that the buyer will pull out. It will put your existing offer at risk, but you can use a bridging loan to complete the process until you find a new buyer.

Residential bridge loans are also a useful option when you are thinking of refurbishing a property. You can use this loan to buy a property, renovate it and improve the market value of the property. You can also use these funds when you want to extend the lease of a property to provide a valid exit strategy.

The most beneficial use of bridging loans is in situations where you have time limitations. For example, when you win a bid at an auction, you have to deposit 10% of the amount at that time and complete payment within 28 days. In such a situation, you can use bridge loans to complete transactions.

What Is The Process Of Taking Out a Residential Bridging Loan?

The application process for residential bridging finance is simple and easier than other types of property financing. First, you need to choose a lender according to your requirements and then make an online application. The lender then reviews this application, carries out the necessary assessment, and offers an initial quote. If you accept this offer, you have to provide the necessary documents to complete the process as soon as possible. If you want quick approval, you must provide the right information and meet the eligibility criteria. \

Bridging loans for residential property investments are usually available as first-charge loans. Their turnaround is extremely quick as compared to typical mortgages. The loan size usually ranges between £30,000 and £3,000,000. It is important to consider the interest rate and additional charges to determine whether you can afford to take out such a loan.

What Is The Interest Rate Of a Residential Bridging Loan?

The interest rate typically ranges between 0.43% to 0.63% per month. However, the interest rate varies depending on different factors, such as the value of the property, your exit strategy, credit score, and experience in property investment. In addition, there are many additional charges like arrangement fees, valuation fees, administration fees, and legal costs, which make it an expensive way of borrowing.

Conclusion

A bridging loan is a type of short-term financing available for commercial and residential purposes. Residential investment bridging loans are more easily available than commercial ones. You can take out such a loan to purchase a property and for any other legal purpose. You may find a number of lenders in the UK offering residential bridging finance, but it is important to research and find a lender offering suitable rates and following best lending practices.