Our bridging loan experts can quickly find and arrange any type of bridging loan for a wide range of purposes. Our team has experience of arranging bridging loans quickly for residential, commercial use and for buying land or property at auction. Suitable lenders can be sourced quickly and loan funds transfered in just a matter of days. We compare the whole market to find the best rates and deals for our customers.
How to find the perfect bridging loan for your needs
Bridging loans can offer a short term finance solution
When you have found the house of your dreams, and want to secure the property, or you’re looking to buy a property quickly to sell onwards then you may have to rely on a form of loan known as a bridging loan. These are used most often for property buying either on the open market or buying via an auction, but can also be used by businesses and private individuals to cover the cost of a purchase while waiting for a long-term financial agreement such as a mortgage to be in place.
Bridging loans are a very useful tool and are popular for buying homes at auction, since you have to submit your deposit on the house as soon as the auction ends. Whatever you need to secure, a bridging loan can help you to cover your financial responsibilities until a sale goes through, or until a mortgage is agreed. If you have never heard of a bridging loan before, then you may want to learn more about it, and find out how it can help you.
What is a bridging loan?
The term ‘bridging loan’ is used in the UK to mean a short-term loan which is used to bridge the gap between something requiring immediate payment, and the delay in arranging a long-term loan such as a mortgage, or until you receive another form of long-term loan. The loan can be agreed with your mortgage lender, or with a specific bridging loan lender, and it often takes around seven working days for the loan to be agreed and to appear in your account, although you should be prepared to wait for up to two weeks (fourteen working days) for the loan to be made available. Bridging loans like mortgages are secured against propery on a first or second charge basis.
They can be used to help you purchase a house or to complete a business purchase before funds are released to you, and will then be paid back once the long-term loan is in place. This means that they are usually only operational until the other money is in your account – approximately one month – although there is a maximum loan period of between two and three years available from most lending companies.
Unlike other forms of loan, bridging loans are not regulated by FCA unless done a a first charge basis. This means that there are little official statistics on loans, and there is little data available on how many loans have been taken out. However, some of the more well-established firms are regulated by City of London watchdogs and the FCA, which means that you are more likely to find a good deal with these lenders, rather than with others who are unregulated.
Calculating the bridging loan costs
Repayment calculator – what are the costs?
Our bridging experts can quickly calculate the monthly costs and arrangement fees using a bridging loan calculator. You’ll know up front what the set up fees are and the monthly ongoing interest payments. The overall costs of the loan will be explained and calculated as part of the loan application.
What types of bridging loans are available?
The term bridging loan is a description of a genre, with several different loans available under this main heading. The loan is available in two specific varieties, known as open bridging loans/finance and closed bridging loans/finance.
Open bridging finance
The open bridging loan will not have a fixed repayment date, but you will still be expected to repay it within two or three years (sometimes less, depending upon the lender). This can be useful when you are not quite sure when money to repay the loan will be available or for example you are waiting for a property to sell to pay off the loan.
Closed bridging finance
The closed bridging loan will give you a required repayment date, and you will be obliged to repay the loan within that period. This can be the perfect loan if you know that money will be available within a few months, or even weeks for example.
Within these two types of loan, there are some variables within the loan, including the emphasis that the lender places on repayment strategies, for example, or the requirement to pay when certain funds become available. You may also have to show evidence of your purchase, whether that is a house, or other form of high-end purchase such as a commercial building or land, including the full price that you will be paying for the property. Most bridging lenders will also require that there is some form of back-up strategy in case the planned repayment money is not available. Their requirements will vary depending upon the type of property you will be purchasing, and how much of a deposit you have available for your long-term mortgage.
When are bridging loans the best option?
There has been a rise in the number of bridging loans being taking out by borrowers, since some home-buyers are being encouraged to use these as an alternative to more mainstream lending. Part of the reason for the encouragement is that long-term loan providers are taking much longer to agree and process loan applications, which can mean that homeowners are stuck without their loan at a time when they need it most. There are several advantages to the loan, including the fact that it is there temporarily, and so will not cost you much in the way of interest over the usual loan minimum of one month.
However, there are downsides to the bridging loans, and these begin with the high cost of having the loan agreed in the first place. There will be a high set-up fee for borrowers, and this is before you even take out the loan. In addition, they can be more difficult for the inexperienced borrower, as there can be legal fees and administration fees before you even get to the repayment of the original loan advance.
Bridging loan calculator – How much will a loan cost?
If you want to take out a bridging loan to cover you for any property buying purpose, then the most important issue will always be one of cost and how quickly you can receive funds and what is the cost going to be?. There is a monthly interest rate applied to the loan, which can begin at 0.75% per month and rise to 1.8% plus per month depending on the lender, borrower and what the loan is to be used for.
If the borrower has a weaker credit rating or low credit score then the fees may be higher. So, a loan for a mortgage cover of £200,000 with a repayment rate of 1% would see a borrower pay around £2,000 each month. A loan of two weeks would still be £1000, and this is before the arrangement and legal fees are paid by the borrower, which can sometimes also be around 1% of the total amount, so again costing £2000, plus other fees also equalling hundreds of pounds. This is why experts always advise caution and a full understanding of the costs and committment for first-time borrowers when taking out a bridging loan.
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