Bridging Loans, or a “Bridge” as it is more commonly known. This expression strikes fear into the person that requires a short term loan. It’s an expression which makes people run for the hills.
This type of loan is the completely misunderstood child of the lending world. This type of loan could be the solution to your immediate problems regarding quick fast finance.
A Bridge can be used for injecting some cash into a business when requiring a quick short term loan, it can help towards residential or commercial purchases. A bridge can help to finance renovation or refurbishment when standard mortgages cannot be obtained in the first instance.
A run down property may have been purchased without a working kitchen or bathroom, a pre-requisite of any property to obtain a mortgage.
Different types of bridging loans
There are two types of bridging loan. The closed Bridge and Open Bridge the borrower can set out the date when a Closed Bridge has to be re-paid.
For example, there may be a definitive date when a property is due for completion and you know that funds will be released to repay the lender, job done house completed and lender re-paid. Alternatively the Open Bridge has no definite date when the loan will be repaid.
The type of properties that can be used as security are many, but mainly residential, commercial, buy to lets, building projects such as self-build and barn conversions and refurbishments to name just a few.
How much you can borrow
The amount that you can borrow is generally a minimum of £25,000 with range, typically, up to £10,000,000, depending on the type of project and the criteria of the lender.
The loan is a short term arrangement, generally up to one year or less, to complete the work required to obtain a mortgage or to sell the property once completed. The interest rates are that which lenders are offering at the time and typically depend on the size of the loan, the Loan to Value (LTV) the borrower’s credit status and the type of property.
The interest rates will be higher than average residential interest rates as the risks for this type of lending is much higher.
As with all loans there are fees to be paid such as valuations, legal fees and broker fees, all different with each lender.
It’s advisable to deal with an accredited and experienced firm that is regulated by the Financial Control Authority.
In conclusion, Bridges are a good source of borrowing to obtain the funds that you require in a hurry. It’s a bit like “Hey Dad, can you lend me 50 quid until I get paid at the end of the month” although Dad won’t roll up the interest on the £50, or will he? Or, will he run to the hills with the bears.
There are many bridging loans on the market, so why not use an independent comparison site to find the best deal for you.
Thank you for reading our article on Bridging Loans. Read this article on how you can make big profits from developing property.
High & Wise