This is a facility which can be useful in the right circumstances, but great care needs to be taken as Bridging Finance can be very expensive indeed if it is allowed to move from a bridge to a burden!

In the right circumstances, bridging finance can enable you to purchase a property quickly at a discount, for example, when it might otherwise not be possible.

For example, you come across a property currently valued at £300,000 but for a ‘quick sale’ you can get it for £250,000. You know that by spending £25,000 you could increase the value to say £350,000. Bridging finance is normally calculated on the value rather than the purchase price, but during the prolonged credit crunch problems, bridging loans are currently at a maximum of 75% of the valuation, and in any event you could find that the actual valuation during a time of falling values is much less than you think!. Frankly, bridging finance is not the attraction it was a year or two back, but in some cases, can still be useful if great care is taken.

Warnings!

1. We would suggest that you apply for a normal mortgage based on the actual valuation of the property first before taking up bridging finance, to be sure that you are going to have funds available to repay the bridging. Ideally you would want to get an actual offer available so that you could proceed with the bridging with confidence.

2. Watch your time scales carefully. If the bridging finance is not repaid quickly it can be very expensive as interest is normally charged daily on the outstanding balance. If there is any danger of the transaction ‘dragging on’ you could find yourself considerably out of pocket.

3. Check out all the costs associated with the bridging loan carefully – both up front and on repayment. Prepare a budget and cost analysis on your proposals and be sure to build in appropriate costs for possible delays and unexpected eventualities.

Used in the right way bridging finance can be most useful indeed for a variety of purposes, but remember those supplying the bridging funds are more concerned with just the security available than on personal circumstances, and as and when you require a more permanent borrowing facility other matters such as status and ability to repay are brought into the equation.