What are Bridging Loans?

Bridging finance loans are widely unknown and are a rather complex aspect of property finance, however, once it is known and understood, it can be easy to see that the institution has extended a lot of perks when compared to other conventional forms of finance products extended by high street banks and other financial institutions.

What are Bridging Loans? | Cebu Finest

What are Bridging Loans?

They are financial products that are utilized by property developers as short-term remedies that can be used to raise possible financing for a property. This kind of loan is often secured as part of the charge on the asset in question and will only be obtained for a short-term period only.

The bridging loan products are riskier and costs higher to take out than regular finances. Many borrowers choose bridging finance when banks are unable to lend on their preferred terms, or where they have a bad credit score, or where the borrower wishes to obtain a property below market value and where she is unable to obtain mortgage contracts for.

Bridging products

The bridging products are provided as a loan against the value of the property (LTV), where most financing institutions offer the loan at 80-85% of the market value.

What are Bridging Loans? | Cebu Finest

Bridging finance is offered from the private funds of the clients, where the leading firms have a massive funding for bridging. These are often backed by big institutions, high street banks, and high net financial individuals.

Many bridging lenders will select and pick what they will lend against and for exactly how much. However, some lenders will only extend loans to prime areas like posh cities and metropolitan centers.

What are bridging loans used for?

At this juncture that you know what bridging loans are, we have to know what bridging loans are used for. Usually, bridging loans are used for one of the following conditions:

1) Investment property renovation
2) Tax bills
3) Auction property purchase
4) Land acquisitions
5) Land refinance
6) Home improvements
7) Short term cash flow


In fact, there are other ways you can use bridging loans aside from all the enumerated above.

What are Bridging Loans? | Cebu Finest

Bridging financing

Bridging finance is often treated as non-status or full status lending. A full status means the borrower is creditworthy borrower, and non-status simply means borrowers with poor credit history.

A lot of the financing done is through non-status finance products as this is often the reason used by financial institutions and banks as bridging lenders. If you are a creditworthy borrower, you can simply go straight to the bank and lay down your intention of borrowing some funds in a short term period.

ALSO READ: The Inherent Pinoy Culture of Borrowing Money

Finally, non-status bridging finance is when loans are granted based on the project where there are no apparent credit checks, scores, etc that would impact the lender’s final determination. This is best for those with very poor credit scores, credit defaults, and arrears.

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