What Kind of Bridging Loan Do I Need?

Bridging Choices for Borrowers

Short term bridging loans are a great method of raising capital quickly, however lenders will want to know how the finance will be paid off and this will affect the cost

It doesn't matter whether you wish to raise finance against commercial or residential property there are basically two short term loan options available.

Closed Bridging Loans

A closed bridge is essentially where the exact repayment method and date has been predetermined at the time of the loan application or completion. As any lender is assured that the loan will successfuly be redeemed, then risk is reduced and therefore the cost of borrowing should be lower as a consequence of this guarantee.

A typical scenario that would qualify for a closed bridging loan would be where a property needs to be purchased before longer term finance can completed, i.e. a mortgage is available but will not be available until a later date.

Open Bridging Loans

An open bridge is required where it is known how the short term loan will be redeemed, however the exact date of redemption is still unknown. Therefore this option tends be little more expensive due to this uncertainty making the associated risks of lending higher.

One example of the open bridging finance option is where a property developer has to build and then sell one or more properties. Another would be a house purchase before the sale of another.

Summary

The key to keeping costs to a minimum is to arrange the strongest exit possible for a bridging loan. The lower the risk the lower the price offered by the bridging lender. "The" bridging finance specialists are available to help secure finance against property today!

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