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Bridging finance can help investors

Over the past few weeks I have touched on several areas of discussion in the industry and this week I intend to focus on what will be a new area for many – bridging finance.

The bridging loan industry is buoyant at the moment with lending for the next 12 months expected to be more than 3bn, reflecting a year-on-year increase of 25%.

Due to the speed at which funds can be released, investors are increasingly using bridging finance as a useful way of expediting the completion of transactions. Often, bridging loans are used when buyers are unable to arrange traditional mortgage funding in the required timeframe.

We see a lot of investors purchasing a number of new-build properties off-plan and getting these at a reduced rate. A recurring problem for people looking to purchase these properties is that some mortgage lenders base the amount they will lend on the discounted purchase price of a property rather than its open market valuation.

Bridging finance can help these clients by giving them access to the finance to purchase a property and repaying it by way of a prearranged remortgage. With remortgages, a number of lenders base their lending on open market valuations rather than historic purchase prices.

We have found that it is vital we explore this avenue for clients if the traditional way does not allow us to help them. We will soon be launching a joint venture with Masthaven which has been operating in this industry for 23 years.

I am certainly not saying that I think bridging finance will replace first charges, and I realise that this money comes at a price. Also, in this era of instant offers, automated valuation models and instant completions, the element of speed in financing is no longer so crucial as it used to be.

However, using bridging finance is a way that potential investors looking to buy new-build properties at a reduced rate can purchase them quickly and avoid the confines associated with normal lending methods.

Losing an opportunity to buy a number of cut-price properties in an up and coming area could prove extremely costly to an investor. Not only that, it is a business opportunity I am not prepared to miss or allow any of the intermediaries who deal with us to lose out on.

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