Bridging finance loans are short-term loans offered by lenders to bridge the gap in your finances when you are attempting to buy a property quickly but do not currently have sufficient funds available to do so. Before you can take a bridging loan, you must demonstrate to a lender that you have a clear exit strategy with which to pay off the loan – such an exit strategy could be the eventual sale of an existing property.
Reasons for using bridging finance may include purchasing a new house before finalising the sale of your old property and individuals or property developers looking to pick up new properties at auction or properties below market value. They are fast and flexible financial solutions that generally last between one day and 12 months.
Bridging finance loans can be broken down into two types: open bridge loans and closed bridge loans. Here we will be looking into the what, wheres and whys of closed bridge loans.
What is a Closed Bridge Loan?
Closed bridge loans are short-term loans with an agreed duration (often between 1 day and 12 months) and a clear exit strategy.
A closed bridge loan is offered when the transactions for the sale of your property and purchase of new property are already confirmed, but extra funds are needed quickly to complete the purchase or pay off an existing mortgage.
Example of when Closed Bridge Loans are used:
- A property owner or developer has a contract stating the sale of a property but needs a loan quickly to secure the purchase of the next property. With this legally-binding exit strategy, lenders have the security to provide closed bridge funding.
Once contracts have been exchanged for the sales of a property, they rarely fall through. For this reason, lenders face less risk when offering customers closed bridge loans over open bridge loans and can do so at much lower rates. Lenders are much more confident lending money, and at a lower interest rate, when they know exactly when and from where the money to repay the loan is coming. You may not even have to disclose your financial situation or credit rating to a lender to acquire a closed bridge loan so long as you have presented contracts for your exit strategy, and loans are often needed for a much shorter duration than open bridge loans.
Closed bridge financing is a much less risky option than open bridge financing and, for this reason loans come at a much lower interest rate.
Let us help you find a Closed Bridge Loan
Taking on a closed bridging finance loan is a big decision to make. Alan Shaw has excellent connections with many big-name lenders and can help you to find the closed bridge loan to suit your circumstances at the best rates. Give him a call on 07710 525151 or make an enquiry today.
If you need help more urgently, just fill out a quotation form and mention in the comments that it is urgent and we will endeavor to respond immediately and give it priority.
About Alan Shaw
Alan has been a financial adviser for a number of years now specialising in mortgages and bridging. Alan is the managing director of Hampshire based mortgage broker “Mortgage Integrity”. Before financial advising, Alan spent a number of years doing property development and his first introduction to bridging finance was a loan he was taking out in order to develop a property! The many years Alan spent in property development and the many times he personally required bridging finance gives him a unique perspective and understanding from both sides. Alan’s contacts in the property development industry gives him insider access to hot, off-market property deals so drop him an email if you would like some info.