SELLING an asset in today’s market is never going to be easy, whether it is residential or commercial property.
Offers which give you the full value of the asset you have often take a lot longer than normal to come to fruition over the last year of so. This is especially the case when selling multiple units at a time.
To combat this, some developers will choose to simply reduce their prices for a quicker sale, which is especially understandable when they are waiting for multiple sales rather than just the one.
Others are wary of dropping their prices and still want what they believe to be the full value, even if it means that they have to wait longer for the right buyer. For these people, companies can offer development exit bridging loans in order to give them some breathing space.
Many people in more general terms seek what is known as a bridging loan to help them sell and obtain property without the need for an immediate traditional buy-to-let or other form of conventional mortgage.
What is a bridging loan?
Bridging loans are a short-term type of loan which is designed to fund or ‘bridge the gap’ between you and a mortgage becoming available. They may also act as a short-term loan in rather pressing circumstances.
Bridging comes in the form of regulated and unregulated, with different rules over whether you can lend to someone against their primary residence. Unregulated or non status bridging does not require credit checking as part of the application, making it more suitable for adverse credit histories such as West One and MT Finance.
A bridging loan can be invaluable when it comes to a property purchase that otherwise would not be possible without it.
It can be used to:
- Purchase stock
- Purchase inhabitable property
- Finance property purchase at auction
- Purchase machinery or It equipment
- Purchase land for future development
- Finance renovation work
Why might a developer want a bridging loan?
There are a variety of reasons that a bridging loan might be cost effective for a developer specifically.
Typically, developers will go for a development loan. So why are so many developers pulling out of this traditional way of them obtaining finance and switching to bridging loans?
Simply put, developers may want more time to find the right buyer, and in the majority of cases they are seeking a like-for-like refinance on existing loans.
Bridging loans are also not often more expensive than traditional development loans. At the lower end of the value spectrum, you can find rates starting at 0.49 per cent a month. Therefore, they can be a very cost-effective and time-effective option for developers.
