UK Bridging Loans A Brief Guide
Bridging Loans are available for a whole range of financial purposes and can be arranged on the basis of a 1st , 2nd or even 3rd charge equity release.
They are generally used as short term loans, arranged when you need cash to bridge a financial gap. They are a very useful option if you need cash for a brief period before you are able to source financing by other means or if you may loose a property purchase whilst waiting for your mortgage to be arranged.
Interest rates are very competitive within the bridging finance market but, as a short term loan, they are naturally higher than those charged on long term mortgages. Interest rates are usually quoted per month. When considering a bridging loan remember, that you may be paying not only for the loan but also for any mortgage on your existing property.
Of course you could get a traditional loan, but this can take longer and the loan terms might be too long or the amount offered too low.
Lenders who offer bridging finance usually look more at the type and quality of the property being used as security, rather than at the borrower’s income and ability to afford repayments. Lending collateral can be more than just one property, business equipment, inventory, commercial or residential properties owned by the borrower can also be utilised as security. Any property you intend to sell can also be placed as collateral with the Lender.
The very nature of these loans usually means that other finance is being arranged, consequently the loan is almost guaranteed to be paid off in full and on time. Which means Lenders are generally much quicker in processing applications in order to get the deal. Loans are quick to arrange, often within a matter of days.
Repayments will typically take place over a period of time ranging from a minimum of six months to one, two or even three years. The applicant can choose to either borrow and pay back the whole amount or opt for interest only repayments.
Bridging finance is a very useful option if you need cash for a short period of time. Loans are available for all types of clients, from limited companies to individuals; from those with excellent credit status to those who have found it difficult to obtain mortgages and loans, including businesses, the self-employed and those with a poor credit history. It’s the security that’s the main factor when Lenders come to decide if you are eligible.
Working with a qualified Broker who understands the process of equiring a bridge loan is the quickest and easiest route to a favourable rate and good terms. Most Brokers will not even charge you a fee for this service, their fee instead coming in the form of a commission from the Lender.
By using a Broker you can get your application in front of numerous Lenders quickly, compare their offers and end up with several who are willing to compete for your business.