How does bridging finance work?

It’s been a while since we’ve posted about the Property Investors Podcast – have you missed it? You can catch up on all the episodes on the YouTube channel, starting with this video from last week. This one is for people who ask ‘how does bridging finance work?’ So, if you find yourself searching for answers to the question ‘how does bridging finance work’ – you’re in luck. Our property icons are on hand to give you the explanations, in simple terms, with examples. The reason they can do this is because they live what they teach and they practice what they preach.

If you are doing a buy, refurbish, refinance project you will want to know all about bridging finance. Buy, refurb, refinance can be explained with a simple example. Let’s say there are a row of houses on a street, each is worth around £100,000. One of those houses is particularly run down and needs a make-over, so it’s worth about £50,000. You go in and buy it for £50,000, spend £15,000 refurbishing it so that it is now worth £100,000 or perhaps more. You get the mortgage company to come and take a look, they will provide you with a mortgage based on the new value. Then you take all your money out of the property, leaving you with a tidy profit.

So, how does bridging finance fit in with this? Well, while you’re buying the property and doing the refurb, you’re not generating income from it. That means you might need a bridging loan for that period. Watch the video to find out more!

 

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