A bridging loan is a short-term solution used to bridge a gap in your finances. But what can bridging finance be used for? From purchasing auction property to funding a renovation, these are 7 of the best uses of bridging loans.
1. Chain Break Bridging Loans
A chain break is one of the most common uses of bridging finance. In this instance, you would use bridging finance to purchase a new property before selling your existing home, and then repay the loan once the property is sold.
There are many instances when you may need chain break bridging such as when you need to act quickly to avoid being gazumped, your property is taking too long to sell but you want to buy a new home, your buyer drops out at the last minute, and your new property purchase is funded from the proceeds of the sale of another property.
2. Buy Auction Property
One of the most popular ways to use bridging finance is to purchase auction property. When buying property at auction, a 10% deposit is paid on the day of a successful bid, and then the remaining 90% must usually be paid within 28 days. Bridging loans can be arranged quickly, which ensures you can complete your purchase within the deadline.
Bridging finance can also be used to purchase auction properties that other lenders may deem unsuitable, such as non-standard and uninhabitable property. Many borrowers use bridging finance to purchase a property at auction, carry out renovations, then pay off the loan by refinancing to a mortgage or selling the property.
3. Buy-to-Let Bridging Loans
Buy-to-let bridging loans, also known as bridge-to-let, are used to purchase property and rent it out. They are often used by landlords and developers who currently lack the funds to complete their transaction. Bridging loans are ideal when you need to act quickly in the competitive buy-to-let market to secure a property, but may not yet have long-term finance in place.
Bridging finance can be used to purchase property seen as unsuitable by traditional mortgage lenders, such as those in poor condition or in need of refurbishment. The most common exit route for bridge-to-let loans is to refinance to a buy-to-let mortgage and rent out the property, with the rental income covering the loan’s repayment.
4. Property Refurbishment
Bridging finance can be used for property refurbishments and renovation works, so is ideal if you’re looking to restore or convert a property. Bridging lenders accept all types of property for renovation, including property in poor condition, uninhabitable property, and non-standard construction.
Bridging finance is available for all types of refurbishments – from light refurbishment works and minor upgrades to heavy refurbishments such as major structural changes and projects that require planning permission. A popular use of bridging finance is to use the loan to cover the cost of short-term renovations, then refinance or sell the property for profit.
5. Property Development
A bridging loan can be used to finance your property development or building project. From small-scale residential self-builds to large commercial property development, bridging finance can be used for all types of projects.
You can use bridging finance for a wide variety of property developments, including new-build developments, property conversions, build your own home, build a property to rent it out, build a property to sell, and bridge the gap between a purchase and full development finance.
6. Purchase Land
Bridging finance can be used to purchase or refinance a piece of land. You can purchase all types of land, including those with or without planning permission, residential, commercial, agricultural, and development sites. A bridging loan is often used to bridge a gap whilst planning permission or change of use is granted.
7. Raise Business Capital
Bridging finance is a great way to raise capital for your small, medium, or large business, whether you’re a sole trader, partnership, or limited company. Bridging loans are fast and flexible to arrange, so you can raise essential funds for your business as soon as you need it.
Bridging finance can be used to solve short-term cash flow issues, fund business activities, purchase new equipment, repay debts, pay operational fees, fund a move to another premises, cover overheads whilsts waiting for an invoice, and support the growth of your business.
Get in touch with Crystal Bridging Loans today to learn more about the uses of bridging finance. From chain break loans to auction finance to property renovations, one of our expert advisers will talk you through your options and find the best loan for your circumstances.