What Can A Bridging Loan Be Used For?
Bridging finance can be used for a variety of purposes so let’s have a look at some of them in a little more detail.
1. One of the most popular reasons for wanting to borrow money on a short-term basis such as by arranging a bridging loan is to enable you to buy a residential property speedily before you have sold your existing one so that you do not miss out on buying it. The amount outstanding on the bridging loan (plus interest if not covered periodically) would be cleared once the existing property has been sold and/or a new mortgage arranged.
2. If someone is having a property built, the monies from a bridging loan can be used to buy the land and complete the building work pending receipt of the sale proceeds of the existing property or mortgage finance being put in place.
3. If you are buying a property at auction, a bridging loan may be obtained to pay the deposit and then, if required, the balance of the completion monies pending the sale of the existing property or the completion of a mortgage.
1. A property investor could arrange a bridging loan to buy another investment property with the borrowing to be cleared once the sale proceeds of an existing investment property are received or a buy-to-let mortgage arranged.
2. A bridging loan could be used to renovate a property that is then to be sold with the sale proceeds being used to liquidate the borrowing.
1. Funds may be raised by way of bridging finance for working capital purposes such as to buy additional stock for the expected increase in sales leading up to Christmas.
2. A bridging loan may be used to purchase a commercial property for occupation by your business pending the sale of existing business premises or the arranging of a commercial mortgage so that the opportunity to buy is not missed.
The above list is not exhaustive but, hopefully, it provides you with a better understanding of what bridging loans may be used for.