The main principle behind bridging finance is to provide
a timely but short term method of borrowing funds to secure title, primarily on
property, and a quick solution to otherwise stretched financial obligations.
Often bridging finance is used to complete on a property purchase while waiting for a
sale to complete or when in a hurry to complete on a purchase. A good example in
the commercial property market is the use of a bridging loan when purchasing at an
auction, when completion is typically required within 28 days.
Most bridging lenders will consider advances of 65% loan to value (LTV) against a variety
of property types. Typically a restriction to 60% will apply to commercial
or semi commercial properties, and 65% against residential or residential investment properties.
100% LTV is possible if third party assets are factored into the equation and debt
serviceability is clearly demonstrated.
Generally you can expect interest rates in the region of 1.25% - 1.65% with a lender arrangement fee also payable.
There may also be an additional exit fee charged depending on the lender and case.
A key differentiator when deciding which bridging lender to use is the level of
service provided. Most bridge deals can be transacted from start to finish within
2 - 3 weeks.
Bridging finance enables property purchasers to act very quickly and close deals
efficiently on a cost effective basis. Bridging finance also provides a good opportunity
for brokers to earn additional income.