How to get a bridge loan?
Using our simple contact form, please fill in your basic details and one of our professional advisors will call you back between the hours of 9 am to 9 pm, 7 days per week. All our staff are highly trained and are willing and able to give you expert advice and an all-inclusive bridging loan quotation.
Is bridging finance for me?
Bridging loans are commonly used to purchase a new property prior to an existing property selling however bridging loans can also be used for many other reasons such as releasing money quickly when fast funding is required.
Some examples of when bridging finance is used are:
- Purchasing uninhabitable investment property
- Purchasing from auction
- Paying an urgent tax bill
- Debt consolidation
- Business finance injection
- Wedding deposit
Bridging finance is regularly used for purchasing auction property and especially when the subject property is not suitable for mortgage finance. Auction rules normally dictate that a 10% non-refundable deposit is required immediately at the time of a successful bid. The balance is payable 28 days after that date otherwise the deposit could be lost. If the condition of the auction property is not suitable for mortgage lending, for example the property is without a kitchen or bathroom, then a mortgage lendercould either reject an application or place a100% retention i.e. they will not release any of the mortgage funds, until the property is habitable and all requested work completed. In this scenario a bridging loan is used in the short term until the required work is finished and the mortgage lender is happy to release funds or grant the mortgage.
Types of bridging loans
There are two main types of bridging loan:
- closed bridge and
- open bridge.
A closed bridge loan is when there is virtually aguaranteedexit strategy in place to repay the bridging loan in a set period of time i.e. the property listed as a method for repayment of the bridging loan has exchanged contracts and the sale is due to complete on a set date.
An open bridging loan is where the exit strategy is not as guaranteed, i.e. the property being used as a repayment vehicle for the bridging loan has not yet sold and as such a firm repayment date of the bridging loan is not as clear. An open bridging loan can be more expensive than a closed bridging loan due to the higher risk level for the bridging loan lender of not being repaid and in an agreed timeframe.
How long does it take?
Bridging loans can be arranged very quickly and in certain instances where a valuation has already taken place and the lender is happy with the choice of surveyor, the bridging finance can be formally agreed within a few hours. This scenario however is not overly common and as the arranging of a bridging loan follows the same path as that for a mortgage it can often take between 1 - 2 weeks before the money is received by the borrower.
Most bridging loan lenders offer interest roll up. This enables the interest generated during the time the money is borrowed to be added to the loan amount. This means that the borrower doesnot have to make any monthly payments until the whole loan is repaid at the end of the term.
The flexibility of bridging finance is its primary advantage as it can be used in the purchase or refinance of property that is not suitable for more traditional forms of finance such as mortgage finance. Borrowers can also benefit from being able to repay without penalty part or the entirebridging loan before the designated end of the agreed loan term.
Interest rates on bridging finance are usually calculated daily and as with all types of finance are dependent on an individual's circumstances but the monthly rates payable are typically between 0.7% and 2%.