Can bridging loans help with overseas property purchases?

Friday, 13 January 2012 05:23

Bridging loans can be used for foreign property

Bridging loans can be used for foreign property

Buying a property abroad is something many people dream of and if you are one of them, you can secure the funds you need by taking out bridging loans.

In the current economic climate, access to finance is much more restricted than in previous years, however, a lack of immediate cash does not have to be a barrier to you realising your dream of owning a property in the sun.

Whether you want a holiday home or somewhere to emigrate to, applying for a bridging loan is one way for you to obtain the funds you need to purchase it.

You may have seen a property abroad that represents a real bargain and want to secure it as soon as possible.

To do this, you have to have the funds available right away, which for many people is not the case.

A bridging loan can therefore be used to purchase the house, meaning you do not have to miss out on your dream foreign property.

There are various points that you need to understand before you take out such a product, so seeking bridging loan advice from a financial adviser could benefit you and provide you with all of the key information you need.

The first point you need to understand before you apply for a brdging loan is the issue of security. Bridging loan companies are happy to overlook factors such as your income, debts, credit history and current employment status provided you have an asset against which the funds can be secured.

In order to qualify, you must own a home that is in the UK. Few lenders will agree to provide finance if the asset in question is based outside of the UK.

If you satisfy the above criteria, the next point to bear in mind is how you intend to repay the loan.

Bridging finance is typically repaid within 12 months, although many lenders will agree to extend the repayment period if necessary.

A popular scenario in which bridging loans are taken out is when a foreign property has been identified and the buyer in question is aiming to sell their UK abode to raise the funds.

Once their home has sold, they then use the money to repay the loan plus interest.

If this is your intention, beware that it may prove difficult to sell your home in the current economic climate, meaning you may not be able to repay the loan by the agreed date.

A key reason why bridging loans are so popular when buying a property abroad is that the application process is typically short – you can usually have the funds within ten days.

This allows you to move quickly and secure an attractive deal and complete the transaction in days rather than months – something that appeals to sellers also.

You need to bear in mind that there are likely to be different processes in place for buying property abroad depending on where it is and you may incur fees you would not normally pay if buying in the UK, so consulting a foreign property expert may benefit you.

Bridging loans are designed to provide a short-term fix and you need to have a clear exit strategy in place, as the interest rates on these types of loans can be high and can see you pay back significantly more than you borrowed if you fail to repay on time.
 

 

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