Jakob Austin from the UK writes our guest post today about different types of financing.  This is very similar to our Rehab Financing that we use.

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 know it.

Closed Bridging or Deposit 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.

Same Day Bridge 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-mortgage 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 It was an excellent product but has been withdrawn recently.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 (http://en.wikipedia.org/wiki/Remortgage) system, but have to wait for 6-12 months to do the re-mortgage.

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.

There are many sourcing companies in UK which advise investors on deposit bridging. Axis Property Investment (http://www.axispropertyinvestment.com/) is one of them and has built expertise over this domain. To know more about deposit bridging and other investment methods visit  http://www.axispropertyinvestment.com/learn.html.

Summary: Deposit Bridging is becoming an integral part in a No Money Down investment. There are two types of bridging Open Bridging and Close Bridging.