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About Bridging Loans – excellent if used correctly
Bridging loans are an essential part of property finance, yet they have acquired a reputation of being “bad”, “awful” and “dangerous”. So why is this?
Correctly advised and properly arranged, a bridging loan is an excellent financial tool. The problem occurs when they are advised in the wrong circumstances, or arranged where an ‘exit’ is not guaranteed. An ‘exit’ is the term used to describe the method by which the bridging loan is to be repaid. If bridging finance is set-up wrongly or without a good exit strategy, it can cost the borrower dearly and in certain situations the borrower can potentially lose the property.
Wrong Circumstances A conventional mortgage should always be used for a property purchase wherever possible. A mortgage is usually available for most circumstances, as shown elsewhere in this website. Only use a bridging loan if there is no mortgage available, as the costs will be expensive and the borrower will incur higher interest rates and arrangements fees. Avoid using a bridging loan to raise capital, unless it’s the last resort and the property is already on the market awaiting sale. Consider asking your existing mortgage lender for a further advance, or perhaps ask your bank for an overdraft instead.
Exit Strategy There are really only three ways to repay a bridging loan; sell the property, remortgage, or use a lump sum of cash from somewhere. Realistically, it’s sale or remortgage. The bridging lender will need to know how you intend to repay the loan – if it’s a remortgage then make sure that you are eligible for the mortgage. People have assumed that they could easily get a mortgage to repay a bridging loan, only to find out that for some reason, they couldn’t. If you intend to sell the property then research the market before you commit to buy and ensure that the property will sell at the price and within the bridging loan timescale.
There’s absolutely nothing wrong with bridging loans as long as a) they’re arranged for the right reasons and b) they’re fully explained at the outset with all fees and costs explained. Choose a term that is realistic and make sure that enough time has been allocated for any improvement work and marketing, if the property is to be sold.
If you require finance for renovating, converting or developing property please use the renovation & development funding form this form has specific questions relating to property development and will enable us to quote the respective product terms.
Please wait while the bridging loans enquiry form loads in a secure socket below. Independent bridging loans is our sister company. This online bridging form provides us all the information to produce a accurate bridging quote for you. If you are not sure if you require bridging, call us for a brief discussion where we can advise you which type of finance or funding package is right for you. Or complete the bridging form below as accurate as you can, and we will review all funding options for you.
Bridging Loans Online Form
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
We will be happy to discuss your requirements for a loan and calculate if a bridging loan will work for your situation and show you the various options that may be available to you.
Are you looking to purchase property below market value? With a bridging loan you can secure against the open market value of the property. Generally loans will be up to 75% LTV of the OMV. So where the purchase prices is much lower your actual deposit needed to put in the deal is significantly reduced and in some cases no deposit is needed at all. With buy to let investment property below market value are usually in poor condition unsuitable for immediate letting without renovation works. In this instance a BTL mortgage is unsuitable and decline to lend. Bridging finance in this situation would secure the property with no proof of rental income or personal business accounts. Works can then be carried out on the property followed by a BTL remortgage to exit the bridge.
Enquire about a bridging loan online. Rates from just 0.75% per month and up to 100% purchase price where sufficient OMV.