What comes to mind when you hear the words “bridging loan“? It is probably images of people in desperate financial situations, trying to find any way possible to cover their next mortgage payment. While that may be one everyday use for a bridging loan, it’s by no means the only one. Depending on your situation, a bridging loan could be an excellent option. So what are some things for which you can use regulated bridging loans? Keep reading to find out!
A bridging loan, sometimes known as a regulated bridging loan, is a type of short-term, real-estate-backed loan secured against the borrower’s home. You can typically utilise them to bridge the gap between selling an old house and buying a new one.
These loans may be the best alternative for you if you need to gather funds urgently to buy your dream property.
What Does Term ‘Regulated’ Represent and How does it Impact Me?
When describing bridging loans, the term regulated represents various aspects of the loan that the Financial Conduct Authority (FCA) controls.
The FCA is a financial services regulator whose mission is to protect customers, improve industry integrity, and encourage competition for the ultimate benefit of the clients.
If you take out a regulated bridging loan, you will get improved protection against strict lending tactics. Thus, these regulations only apply to personal borrowers. They do not apply to investors or entrepreneur borrowers.
What are Their Uses Exactly?
Their most typical usage is purchasing a home before its sale takes place. But, there are numerous other popular uses, the most common of which are as follows:
Buying Property at an Auction
Traditional mortgages often take several weeks or even months to arrange. Bridging finance provides a convenient way to quickly arrange the funds needed to buy a property. The main downside of bridging finance is that it tends to be more expensive than a standard mortgage. Thus, borrowers are typically required to pay higher interest rates. There are several ways to reduce the cost of a bridging loan, such as taking out a larger mortgage or using a P2P lending platform. Bridging finance can be an excellent option for those looking to buy a property quickly at an auction. Moreover, the experts suggest that it is essential to compare the costs carefully before taking out a loan.
Real Estate Refurbishment
If you’re planning refurbishment work on your property, you must be aware that some mortgage lenders may not assist you. You can use bridging finance as an alternative where refurbishment requires additional borrowing. Or where the works are particularly demanding. Bridging loans are typically short-term loans used to ‘bridge the gap’ between the renovation of a property and the point at which longer-term funding becomes available. P2P lending is an option that you might want to consider. That is where individuals lend money to each other, often via an online platform. Bridge loans can be a great way to fund your refurbishment project, but it’s necessary to shop around and compare rates before committing to anything. Bridging finance can be expensive, so it’s essential to make sure that you understand the terms and conditions of any loan that you take out. It can be a great way to fund your refurbishment project. But it’s important to remember that you have to repay the loan within the deadline.
Increasing the Lease Time
If your leasehold is approaching the 60-year mark, a bridging loan can help you rapidly gather the capital needed to buy a lease extension. After you receive the lease extension, you can do the following:
- Remortgage to pay off the bridging loan, or
- Sell the leasehold if that is what you want to do.
You can get a bridging loan from a P2P lending website
Providing Care Home Fees
Many home care facility providers want a couple of months’ fees upfront when someone is moving into a care home. For many, this is beyond their reach and may necessitate a move to a less preferable care facility. So, you can use bridging loans to free up initial costs, allowing you to choose from a broader range of properties.
A bridging loan can be a great way to raise money quickly, especially if you face the prospect of Tips to stop the repossession of your home. With this type of loan, credit problems and income are generally not an issue if the other party wants to sell your property. They can do that to settle your debt. As a remedy, the P2P lending platform will typically offer a short-term loan for up to 12 months, with the option to extend if needed. That can give you the time you need to pay back the remaining mortgage on your property. But there is one catch: you should have adequate equity in your home to repay the bridging loan. That will prevent you from the additional stress of worrying about losing your home.
So this is one of the ways with which you can use the bridging loan. Assuming you are unsure about this type of loan, it’s always worth contacting a financial advisor to get expert advice.
Allocating Shares of the Property to your Partner by Selling Out
You can raise funds to finance the buying of homes for you and your partner, assuming you want to sell a property where both of you were residing. Or if the court wants to settle a property division between the spouses.