Bridging loans: Exploring the different ways to use them

Bridging loans are short-term loans that bridge the gap between two long-term borrowing arrangements. When they entered the market over 20 years ago, they were lending solutions only offered by a limited number of lenders.

During the credit crunch, banks tightened their lending criteria which made it harder for people and businesses to secure a traditional loan or mortgage. Bridging loans became a flexible and quick solution that prevented property chains from collapsing. Because of this, they grew in popularity massively over the years.

Bridging loans are now no longer a niche product, but a well-known and popular choice for property professionals and investors.

Residential light refurbishment bridging finance

This is where a specialised bespoke lender is beneficial to the borrower. If you’re looking to improve a property that you already own, a light refurbishment bridging loan can help. It covers the cost of contractors, tradesmen and the goods necessary to carry out improvements.

Due to the nature of the work needed, this loan is usually offered for about six months. The loan is offered against the property’s projected value when the refurbishments are complete. This means that improvements to the property carry significant weight when applying for the loan.

Bridge-to-let opportunities

The buy-to-let market is a popular way to invest in property. Owners get short-term income via rent and at the same time increase their long-term capital as the property increases in value over time. However, being able to purchase a property as soon as it comes on the market can be critical to getting the benefit from this.

Many investors don’t have enough capital readily available to buy a property outright. Additionally, organising a buy-to-let mortgage can be time-consuming. In contrast, a bridge-to-let loan can be approved quickly – so investors can buy prime property that will offer them the best returns.