Bridging Finance Simplified
Category Educational
Bridging finance in the property sector has been around for some time now and there are several companies in South Africa offering these types of services. It is a product that, when utilised effectively, can facilitate the transfer of properties by allowing access to funds locked up in a property.
Essentially bridging finance provides a short-term solution that releases funds that are tied up in secured property transactions that are waiting for registrations in the deed's office. This can take the form of commission advances, seller advances or mortgage advances.
The costs of selling a property are often overlooked and can add up. Conveyancing attorneys often need these paid before they can transfer the property. If you do not have access to the required funds, the transaction can be stalled and potentially fall apart altogether. Sellers will often have more than sufficient funds locked in the property but cannot access these. Bridging finance can provide access to a significant portion of these funds.
The below list provides some examples of where bridging finance can be used, but the funds could essentially go towards any personal use:
- Commission advances - agents that have sold properties and require access to their commission prior to transfer.
- Seller advances - to go towards rates/levy clearance certificates, transfer costs, or even that deposit on the next property.
- Mortgage advances - new/switch/increased bonds where clients require funds prior to bond registrations for deposits on alterations or for the deposit/purchase price on a new property.
Underlying transactions need to be secured and unconditional prior to any advances. Bridging finance companies will advance a percentage (often around 80%) of the net proceeds that are due to the individual/entity that requires the funds. They will then charge a daily discounting fee based on the amount advanced and are settled directly by the attorneys on registration of the transfer/mortgage bond.
Unlike many traditional credit agreements, there are no restrictions on where the funds advanced via bridging finance transactions can be used, and these often only take a few days to put in place and pay out.
Choosing which bridging finance company to use is not easy, and often attorneys will try steer you towards their preferred company. But a good place to start is on the Bridging Finance Association of South Africa's (www.bfasa.org.za) website to make sure they are reputable and registered with the association. Then it is worth getting comparable prices from a few to check you are getting a good rate. But the ultimate choice of bridging finance provider is up to you and cannot be dictated by anyone else, even the attorneys.
The BFASA is a representative body for the industry and has a code of conduct that all registered bridging finance companies need to comply with. Their website provides links to all the registered companies' websites where you should find it easy enough to get in touch with any of them.
Fever Three Finance is just one of these companies that is based on the North Coast of KwaZulu-Natal and providing its solutions to anywhere in South Africa. We are a boutique firm that offers competitive rates (see attached cost/settlement calculator to play with) and a personalised approach and service to bridging finance solutions. The individuals behind the company collectively have over 100 years of experience in the property and finance industries and are always available to assist and add value to your transactions where they can.
Feel free to get in touch with us for any queries or if you would to arrange a coffee to discuss our offerings.
Grant Gibson - Fever Tree Investments
Email: grant@feverthree.co.za
Cell: (+27) 76 122 4451
www.feverthree.co.za
Author: Grant Gibson
