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Short-term funding, or as it is most commonly known a bridging loan, is bridging finance provided over a short period of time. Bridging finance loans can be used to buy a property, when an additional period of time is required to sell another, allowing you to “bridge the gap”. Buyers often require a bridging loan when completion is imminent and/or the property requires further work to ensure it is habitable.
It can be regulated (on a property which is currently or will be occupied by the owner) or unregulated (a property used for commercial or investment purpose). Whilst the majority of bridging loans are secured on a first charge basis they can also be secured on a second charge.
The bridging loan can be arranged on either your main home or an investment/commercial property for a purchase or a re-mortgage. The lender will require a substantial deposit or use the current equity in the property (of 25% and above). Payments are commonly included within the total loan and repaid upon exit. Obtaining a bridging loan is not solely reliant upon the client’s credit profile or current income. Lenders place more importance upon the client’s ability to repay within the time frame (the exit strategy).