Property Bridging Finance and When to Use It
September 26, 2016
Property bridging finance is a short term interim method that provides temporary loans to fulfill immediate and short term liquidity needs during an asset acquisition while a permanent and bigger financing is still being processed and therefore not yet readily available.
The tool has proven to be very useful and beneficial to many investors but a good chunk of people still find them confusing and it still sounds foreign to their ears. This is why today we’ve decided to list down the various instances and items for which a property bridging finance is used for. Here, take a look.
- Research Costs – Looking for a real estate asset is surely no easy task. It doesn’t come for free either. Chances are you’ll be scouring newspapers and online listings for places. You’ll even drive and check on them and where some occasions call for it, you might find yourself hiring a real estate agent. All these come with a price and are therefore part of any investment budget.
- Legal Fees – Buying a property means having to deal with a lot of legalities. For instance there’s the contract. Add to that the titles and ownership papers. Plus, let’s not forget about the taxes. You’ll need a lawyer or at least a solicitor for all of these.
- Survey Expenses – If you close in on a deal without having the asset surveyed beforehand then you’re signing yourself up for trouble. As a rule of thumb, it is important to hire a chartered property surveyor to examine the probable investment to validate seller claims such as structural condition, market value and depreciation. They too can shed light into matters crucial in your decision making such as the estimate on ongoing costs, appreciation potential, safety and security and more which the sellers may not have oriented you with.
- Security Deposit – This amount pertains to the sum you pay the seller to prevent them in offering the asset for sale to other buyers. This only covers a set period of time which should be long enough for you to finish processing your permanent financing source. Failure to come up with a down payment after the set date will free both parties from the agreement. The seller can offer it up to others but you can no longer recover the deposit.
- Down Payment – Property bridging finance is also used to pay up the down payment. This is equivalent to a certain percentage of the total asking price on the asset which must be paid upfront and in cash.
Property Bridging Finance Mistakes that Give You a Headache
August 12, 2016
Time and again we have been told that we’re supposed to use financing the way they were designed. With many of them available and the alternatives right at our fingertips, it’s no surprise as to why many would often commit crimes and slip-ups when it comes to using them. Blame lack of knowledge and perhaps our stubbornness. Property bridging finance for example has proven to be one of the more prominent methods out there but many blunders are still made that overshadow the benefits it was supposed to give. Take a look at the following mistakes that could give you a massive headache.
THE MISTAKE – Long Term Usage
Many fail to grasp the fact that property bridging finance is an interim funding method. In other words they are short term and temporary loans taken out to provide for short term liquidity needs while a bigger and permanent financing is being processed or arranged. Using it for the long term will be unfavorable. Because they only cover a period from a few months to three years at most, interest rates are slightly higher compared to long term credit which is reasonable considering the risks shouldered by the provider. So in short if you use it for far longer than it was designed for, it becomes expensive.
THE MISTAKE – Lack or Absence of Proper Budgeting
Cash is cash. It comes and it goes so it’s a matter of responsibility to ensure that it is spent effectively and efficiently thus the need for a budget. You need to allocate the fund wisely across your needs or you risk wastage which we all dread.
THE MISTAKE – No Exit Option
Knowing how you’ll pay off and close the bridge is essential from the onset. This applies to any form of credit. If you don’t do this ahead of time then you might end up suffering from consequences like penalties. The good news is bridge loans are flexible when it comes to repayment options, unlike other credit alternatives. Users can either opt to pay it out prior to maturity or at maturity date such when the permanent financing becomes available and cancels out the interim.
THE MISTAKE – Poor Needs Assessment
As mentioned earlier, property bridging finance is used to provide for short term liquidity needs. Such needs must be assessed properly to ensure that one does not under or over-borrow.
Loan Application Hacks
July 1, 2016
Applying for a loan is not an easy task. This we have come to acknowledge and for good reason. But just because something is challenging doesn’t mean that it’s impossible. It is and it takes just the right tricks to make things a tad bit easier. Care to know what these are? If you do, then better take a look at the following loan application hacks from Alternativebridging.co.uk!
- Choose the right lender. – This is a very crucial part when applying for any type of loan, personal or commercial, short term or long term. Also keep in mind that each one offers a distinct service and will come with different terms so always make sure to do your homework ahead of time and don’t be afraid to ask too.
- Ask someone to read the terms with you. – When checking out the contracts and documents, it is best to have someone else read and understand it. Then try discussing them together and see if the both of you have similar interpretations otherwise you might want to clarify it with the lender and even have the phrasing revised to avoid misleading clauses.
- Check your credit score ahead of time. – This shall help you align your expectations in terms of the type, amount and viability of your application. This score presents your creditworthiness and therefore contains all past and present credit transactions.
- Borrow less than you can afford. – It would be absolutely silly to loan for more than you are capable of repaying in the future. Always assess not only your needs but also your limits. If you borrow more than you could ever afford, you’re setting a trap for yourself towards insolvency. Plus, no one will lend that much if you’re not worth as much.
- Check the penalties. – Long term loans cover a long period ranging from five to more than twenty years. One can never be sure of the future and to practice a little precaution it would be wise to consider the weight of the consequences should one defaults or is delayed in payment.
- Plan the loan. – Before choosing and applying for one, try incorporating the debt into your financials. How is it? Does it heavily weigh down things? Does it pose threats? You have to look at it in all angles because chances are the lender is going to ask your plans not only in terms of usage but also in payment.
We hope you found these loan application hacks from Alternativebridging.co.uk as useful as we did. Good luck!
7 Ways to Budget Funds Wisely
May 27, 2016
Buying a piece of real estate property is no ruse nor is it a piece of cake. The process and requirements is surely no walk in the park and more of a hike up and down the Everest. It’s tough business especially money-wise. Because this type of investment is significantly valued, the prices by which these are bought can be staggering too. Sure some of them may be more affordable than the rest but it will sure require quite a significant sum to purchase one. That being said, the task of budgeting one’s resources is a must and today Alternative Bridging tells us how to do so wisely.
Tip #1: Acknowledge Needs and Costs – Make sure to establish and list down all the expenses that will be necessary for the transaction. Remember that this will include pre and post expenditures. There is more to acquiring properties than just their selling price.
Tip #2: Determine Fund Limit – Know what your sources of cash are, their timing as well as the amount. Once settled, set a limit that will enable you to avoid any overspending of sorts.
Tip #3: Order and Prioritize – With a list of expenses on hand, rank them down by order of timing and priority. Some of them may be foregone while others having more immediate need than the rest. This will enable not only a better way of allocating finances but also of keeping everything on track.
Tip #4: Keep It on Schedule – Not all needs will come at once. Some of them will be but definitely not all. This is why it would be wise to keep everything listed and on schedule to avoid any hiccups and shortages.
Tip #5: Track and Record – All paperwork, documents, receipts and whatnot should be recorded, filed, organized and maintained for accounting, tax and legal purposes. Make sure not to lose any of them.
Tip #6: Compare and Canvass – Before diving headfirst on a particular cost in relation to the investment, make sure to compare and canvass to better weigh down on options. The first choice we see is not always the best out there, quality-wise and cost-wise.
Tip #7: Quality over Anything – Lastly Alternative Bridging stresses the need to always choose quality properties, services and investments over any day. It makes for a better return of one’s money. No amount of budgeting will suffice if one skimps on quality.
Myths About Commercial Bridging Finance Debunked
April 19, 2016
Commercial Bridging Finance is an interim funding method used to provide immediate cash for the initial and upfront costs to a commercial acquisition. Although its use is pretty widespread, it still isn’t as popular as traditional modes of borrowing like mortgages and bank loans which is why a good number of people and organizations still find it confusing thus leading them to fall prey to certain myths.
Today we are going to debunk such myths so everyone gets to have crystal clear understanding about commercial bridging finance and what it can really do.
MYTH: It only works for real estate properties.
DEBUNKED: Although it is more commonly used in terms of property acquisitions, it is still feasible for other commercial and business needs such as inventory purchases or machinery acquisitions.
MYTH: It’s another line of debt.
DEBUNKED: Technically, the bridge is still a loan but it wouldn’t exactly have the same burdens. First of all, it is short term in nature so interest does not spread out as much. Second, the payment for it is to be closed by permanent financing as soon as it becomes accessible, in other words, the latter closes the former making it feel more like an advance rather than a borrowing.
MYTH: It is not available for everyone.
DEBUNKED: Just like any other type of financing, each provider will have their own set of requirements and qualifications but this does not go to say that commercial bridging finance is exclusive to a select few. It can be employed by investors, individuals and organizations regardless of their intended purpose for it.
MYTH: It is very hefty and expensive.
DEBUNKED: The interest rate is slightly higher than that of a long term loan but this is only for the fact that providers bear a bigger risk in such an arrangement. Even so, it is not expensive or hefty as the bridge is for a short term period only and will thus cover a few months to two years at most.
MYTH: It can be used as the main fund line.
DEBUNKED: Commercial bridging finance is an interim funding medium and a stop gap measure. This means to say that it shall cover for the time lag between a debt or need coming due and one’s main fund line. Therefore, it only acts as a connector or a bridge and not a replacement of the latter.
How Repayments of Property Bridging Finance Work
March 16, 2016
Property Bridging Finance is one of the world’s leading short term loan and interim financing options today. It allows businesses to derive immediate cash to help fund their property acquisition needs while waiting for permanent financing to be made accessible.
It is celebrated for its various perks such as the following:
- Immediacy – It’s fairly faster and less troublesome to apply for and get an approval with bridging loans. This makes them the perfect option for property acquisition and its various initial cash requirements.
- Short Term – The shorter span of time that it covers makes it less of a burden. Because it spreads itself within a few months to two years at most, it becomes fairly easier to handle compared to others.
- Opportunity – The main use of this financing medium is geared towards grabbing opportunities. In the real estate market, buyers need to act fast or risk losing the chance to the next investor in line. Failure to provide for things like security deposits and down payments can seriously mess up an investment undertaking.
- Savings – Many assets, especially prime ones, appreciate in value over time. In other cases, they get bought and resold over and over again with each transaction increasing in asking price as each seller aims for a profit. The longer it takes for one to buy them, the more expensive they can become. The use of the bridge eliminates this risk thus the cost savings.
- Stop Gap –Property Bridging Finance connects a current need and future funds, thus eliminating the gap between these two points. This is particularly useful and beneficial in business as it aids in the continuity of operations and prevents hiccups and delays from occurring and creating losses.
But apart from the ones listed above, Property Bridging Finance is celebrated for the flexibility of its repayment options. What does this mean? The method, unlike others, allows borrowers to close it out even before it matures or becomes due. Remember that methods like bank loans, mortgages and the like are to be strictly paid upon maturity. In other words, users can close out the bride loan before maturity date and as early as they are able to. At the same time, it can also be done upon maturity, when the permanent funding comes through. This flexibility makes it all the more east to use and less burdensome.
How Commercial Bridging Finance Sustain Operations
January 1, 2016
In business, space is a crucial element to operations. After all, you cannot hold office, manufacture products or fill up your store shelves in thin air. You need something tangible, one that’s concrete, durable and effective to say the least. However, we all know that purchasing a property isn’t going down an easy-peesy route. In fact, moving and relocating or even opening up a new shop can put a hamper on your operational momentum because it takes time. Luckily, we have something called commercial bridging finance!
What is it exactly? Commercial bridging finance is a type of gap financing arrangement that acts as a stop gap measure wherein the borrower can get access to short term loans to meet its short term liquidity needs. It is names as such because it helps bridge the debt coming due and one’s permanent source of funding.
Still confused? Come up with a list of funding sources that you can use to finance your commercial property acquisition. For sure you’ll have items in the likes of bank loans, mortgages, proceeds from a sale, income and savings to name a few. However, if you take a careful look at all of these you will come to realize that they all take time. All this ‘waiting game’ is what can hurt your operations because it further delays your use of the property and therefore its benefits.
With the aforementioned sources, you need to wait before the resources are pooled or that money is finally released. This can be a problem because getting any real estate investment will come with initial costs which you have to provide for. Examples of these expenses include research costs, surveyor fees, security deposits, down payment, finder’s fee and taxes to name a few. Plus, spotting a great deal is no easy feat. You’ll have to battle it out with the other buyers in the line too. Failure to come up with the money for these needs can hinder an acquisition. This hurts operations again as it further delays the purchase and use of the asset.
All of these risks are negated by commercial bridging finance as it provides for all such short term needs. What makes it even better is that it can be easily closed out before or at maturity once your permanent financing has finally come through. Because it aids in the successful acquisition, it is able to help sustain operations and prevent any delays and hiccups. In business, time is of the essence. It’s pretty much golden.
Learn more about bridging finance here alternativebridging.co.uk.
How Repayments of Property Bridging Loans Work
October 27, 2015
Repayments of property bridging finance are one of the many reasons that add up to its charm. This interim financing method is already beneficial in a myriad of ways and helps buyers, both individuals and organizations, to make better, effective and timely real estate asset acquisitions.
Property bridging loan is first and foremost a stop gap measure allowing the connection between an obligation coming due and a yet to be available permanent source of funds. It works to provide for short-term funds in times of short-term liquidity needs. This can happen a lot in many asset purchases because most individuals and organization use funds that need the accumulation of time.
Take for example bank loans and mortgages. We all know that although they provide for your needs, it can take a significantly long period of time to cover for its application and approval often requiring you to wait from weeks to months. The proceeds from a sale of an old property, salary and income will need some waiting too.
Because of all this “waiting game”, buyers are put to a certain disadvantage especially when they’ve already found the asset they wish to acquire. Remember that to close a contract and take hold of the right to buy the asset, one must first be able to provide for a security deposit and a down payment. Let’s not forget about all the other expenditures necessary to find the property.
When permanent financing is not yet available, buyers can make use of property bridging finance to avoid risking any opportunity losses. It can also be seen as a cost cut for those who will have to sell the asset they are currently using to acquire the new one since they won’t have to rent as they move out and wait for a buyer.
Now as far as payment goes, property bridging loan has a huge advantage because it allows for flexibility and liberty.
Providers like alternativebridging.co.uk, allow the repayments of property bridging finance to happen on or before the maturity date. Borrowers may opt to close and pay it out early on as they are capable of doing so and as they deem fit. At the same time, they may also opt to wait for the maturity date which is the time where the permanent source of finance comes through. Because of this flexibility, this interim financing method does not add to the burden of obligations but rather aid buyers in their endeavors.
What a Family Benefits from Alternative Property Finance
August 4, 2015
Many families and home buyers make use of what we call bridging loans or alternative property finance in the purchase of their desired residential properties and investments. It is one of those forms of credit that people are likely to tell you about when you wish to get a house, an apartment or a condo unit. But then again, many are still confused as to what they can actually do, what their very purpose is and how they can help. Allow us to answer those queries for you.
First of all, a bridging loan pertains to a sum of money lent by a financial institution to cover an interval between two transactions. This is why it has been referred to as a stop gap measure and an interim financing method. It provides for the home buyer’s short term and immediate needs (e.g. down payment, initial installments, agent costs, etc.) at that certain point in time where permanent funding sources have not yet been made available, as is the case with waiting for a bank loan and mortgage to be approved or waiting for an old house to be sold.
Families can therefore benefit from alternative property finance in the following areas.
- First of all and as mentioned earlier, they are short term in nature and would therefore not be a stressful burden for families seeking out a home. The bridge shall only be used at a specific point in time, often mere months, and does not double up as a second form of debt. Additionally, they are easily closed and repaid. Home buyers may pay it out even before maturity should they be able to do so or upon the arrival of their permanent source of funds.
- Second, they help families cut back on costs. Most if not all properties tend to cost more tomorrow than today. This is oftentimes due to the continued appraisal of lands and the development of communities, establishments and infrastructures that give way to appreciation in value. In other words, buying a home today costs less than doing so in the future.
- Third, there are many buyers out there so you have to keep competition in mind. A really great home will not stay in the market for long. Someone can snatch it up if you fail to get it on time. Bridging loans help prevent that.
- Lastly, bridging loans help families save on their rent. Many families who sell their old houses to use its proceeds to fund for their new one will often have to move out and rent a place while awaiting a buyer. This contributes to more expenses. By using the bridge to close the deal on the property, families can skip the rental and immediately move in while waiting for the old property to be sold.
Learn more on alternative property finance at this site alternativebridging.co.uk.