Posts Tagged ‘bridging an investment’
Bridging Your Investment
When looking for a “No Money Down” investment, an option gaining popularity is deposit bridging. If deposits aren’t available as ready cash it is advisable to be able to borrow it. Bridging is of two types open bridging and closed bridging. In open bridging, lenders don’t know when the money will be repaid while in closed bridging they do.
The first option is called closed bridging. It is offered as a secured short-term loan against any residential property. It requires Market Value lending where investment doesn’t come from a vendor but a third party. Deposit bridging, works well for individual resale properties. If the incentives are high enough it can result in a “No Money Down” investment but it is usually a Low Money Down.
There is also what is known as Same Day Bridging and Refinance. Mortgage Express allows investors to buy a property at a net price, using short term bridging finance (24 hours). The investor immediately re-mortgages the property, based on the market valuation. It was an excellent product but has been withdrawn recently. You can still use the bridge and re-mortgage system, but have to wait for 6-12 months to do the re-mortgage, so same day is a thing of the past.
Lastly is the idea of Open Bridging. In this Short and Medium Term Techniques are used for Low and No Money Down. Lenders fund short term finance up to 12 months. They will lend up to 70% of Open Market Value. Many lenders restrict the maximum borrowing to 85% of the cost, no matter what the open market value and the purchase price is. However if you pledge another property, you can borrow up to 100% including all costs. This would result in a true No Money Down deal.
Open Bridging is suitable for investment property with large discounts, new build and re-sales, auction property and distressed sales. However open bridging isn’t advisable as the cost of open bridging is high, obtaining discounts is difficult and the investor cannot commit on a mortgage 6-12 months ahead.