How bridging loans benefit you?

Short term financing gap – most bridging loans are used when there is a short-term gap in financing. These loans can be taken up to “bridge” that gap and provide liquidity while the borrower is working on arranging other, long-term solutions.

• Scenario 1: A client is looking to purchase a new investment property. To do so, they were planning to sell one of their existing investments. Therefore, their ability to purchase the new property is linked to the successful sale of an existing asset. A bridging loan can be used to “bridge” that gap – borrowers can apply for a bridging loan secured against their existing property and use the loan to acquire the new property. The bridging loan is then repaid as soon as the sale of the existing asset is finalized.
• Scenario 2: A client is selling an existing property which has an outstanding mortgage in place. The mortgage might be coming to an end around the sale date. If there is a delay with the sale of asset a bridging loan can be taken up to replace the existing mortgage, allowing the client additional time to sell the asset. As in the example above, the loan would be repaid on completion of sale.

Speed – bridging loans can be arranged faster than traditional, long-term financing. Typically, the process can be secured in up to four weeks. Speed is one of the key benefits of using a bridging loan.

• Scenario 3: A client is looking to purchase property at an auction. These types of transactions require relatively quick completion which makes traditional mortgages almost obsolete. Bridging finance can present alternatives to 100% cash purchase – borrowers can take up bridging finance to meet the auction deadline, secure the asset and then look to refinance with a traditional mortgage provider.

Retained interest payments – interest payments are typically retained (or added to) the loan balance during the term. It means that the borrower does not need to make monthly payments during the term but rather pays the interest at maturity, when the loan is paid back. 

• Scenario 4: A client is looking to acquire an investment property that requires small refurbishment works. It means that in the beginning the property would not be rented out. Taking up a bridging loan to purchase the property (versus traditional loan) will allow the client to carry out some upgrades to the property while, during that period, interest payments will be retained rather than paid by the client. Once the property is rented out and generating income the loan can be refinanced into a traditional mortgage.

At Holocene we have access to bridging finance in a variety of international jurisdictions and for a variety of asset classes. Give us a call on +41 78 737 64 24 to discuss your requirements.