Ordinarily, when purchasing a property below market value, there is almost always a good reason for the discount. Usually, this is because the vendor requires a quick sale, or that the property is not in a good habitable condition for instant occupation.
In these circumstances, purchasers will usually need to purchase using cash, or by using bridging finance.
When a cash purchase is not possible, purchasers will usually use bridging finance.
Bridging finance, in simple terms, is a form of short term finance which enables the purchase of a property that isn’t easily mortgageable using standard mortgage lenders. It is traditionally much speedier than using a traditional mortgage lender also.
The main aim of bridging finance is to ‘bridge the gap’, to enable a purchaser to buy a property and make the necessary changes to render it mortgageable with mainstream lenders. At that point a standard mortgage can be applied for to pay off the bridging loan or the property can be sold.
During the term of the bridging loan, the interest usually ‘rolls up’ meaning no monthly payments are required.
You will typically need at least a 25% deposit, and will need to also fund associated costs, as well as any refurbishment costs.
Bridging finance is a varied field, with many different parameters, so specialist advice is certainly required.
Our friends at Carbon are experts in advising on bridging finance. In addition to this, they can assist with your exit strategy to pay off the bridging finance. Find out more about Carbon by clicking the button below.
