Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bridging Finance: An Option for Real Estate Business

Housing-Market / Debt & Loans Jul 09, 2019 - 04:45 PM GMT

By: Submissions

Housing-Market

If you are involved in real estate, the chances are high that you will be in need of some sort of financing for property development. A structure that is not developed properly will not sell – which is why you have to come up with ways to cover up the gaps.

Most of the time, this type of financing is usually done through borrowing against the property – and in most cases, the form of financing for property development goes under the name of bridging loans. By reading this guide, you will find out how bridge loan works and how it can help you in your real estate business.


Principles of Bridging Loans

Bridging finance may be used to acquire and develop property – no matter if it is of residential or commercial nature. Real estate developers may use the money to completely develop a property from ground-up – or to do some modest renovation or refurbishing on an existent home.

The key to understanding a bridging loan is to grasp their short-term nature – although short-term is actually a relative phrase. Most of the time, by “short term,” we understand around two weeks. However, according to Adiel Khan, Business Development Manager from Property Finance Partners – Bridging Loans, “the average term for a bridging loan is generally around 11 months. This is because people are trying to solve as much of the problem as they can by using a temporary solution.

Bridging loans are, in essence, temporary loans that will allow you to get from the point where you are right now to where you want to be – until the term is paid completely and you find a solution to the problem. In other words, bridging loans represent a “bridge” between a temporary fix and a permanent one.

In terms of real estate, you might get a clearer picture of this illustration this way: think of bridging loans as a financing way to get the work done – no matter if it is renovating or completely developing a building. Its ultimate sale or arrangement of a mortgage should be the goal – the solution to this “problem.”

Main Uses for Bridge Loans

If you are interested in using bridging finance to sponsor your real estate business, here is what you may use that money for:

  • Buying a particular property at an auction
  • Renovate, convert, or restore a property
  • Prevent the foreclosure of a property
  • Buying a property that is sold at a bargain price
  • Changing or renovating your business office quarters
  • Improving your credit score

Simply put, bridge loans can be used for anything, as long as they can solve a temporary problem without compromising the permanent solution. If the temporary fix that you are doing right now will be helpful in the long term, then bridging finance is the right option for you. Types of Bridging Financing Available

Depending on their preferences or their possibilities, real estate businessmen have the opportunity of going for two bridging financing options:

  • Closed Bridge loans

Closed bridge loans are generally the lenders’ favourites, since they have better certainty for loan repayment. Closed bridging finance will be given for a fixed time frame – the last payment being made on a date that has been agreed to by both parties. It also has fixed monthly payments that you will have to respect. Because of these strict rules, bridge loans have much lower interest rates compared to the other type of bridging finance. However, the downside is that breaking these terms will lead to financial penalties that can be quite severe.

  • Open Bridge loans

Open bridging finance is generally given to those who do not wish to adhere to a fixed schedule. There are no fixed pay-off dates – but because of this, the interest rates are also fairly high. Furthermore, in order to ensure the loan’s security, lenders sometimes deduct the interest from the advance they give for the loan. This loan type is generally preferred by real estate owners who are not entirely certain of the way their business will shift.

That being said, open bridge loans are not as popular as the closed bridge ones – mainly because the interest rates are too high to take this risk.

Final Thoughts

Bridging loans can be very helpful for a real estate business if you use it correctly. The right fix can raise the value of the property greatly – increasing the profits even more as it goes on the market. You just have to choose the lender carefully so that you may get the best benefits.

By Adiel Khan

This is a paid advertorial.

© 2019 Adiel Khan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in