Could a bridging loan help you secure your dream home?
Thursday 8 September, 2022
Bridging loans are considered a type of mortgage or a short-term lending solution. They are useful for anyone under time pressure who needs to organise a mortgage quickly.
Who can apply for a bridging loan?
Anyone wanting to buy a property can apply for one. All you do is take out a loan secured against your property.
When do you use a Bridging loan?
Bridging loans are often taken out as short-term finance to prevent property chains from breaking down, to prevent buyers losing the property they want. Property developers purchasing run down properties or anyone purchasing at auction may also use bridging loans, as they need to access funds quickly. Also, some mortgage lenders do not want to lend on properties that need lots of renovation work and might not be in a good order, so they have no choice but to take out a bridging loan.
How can you access a Bridging loan?
To take out a bridging loan you will need a significant deposit and/or equity if you raise funds from your own property. You may also need proof you can repay the monthly interest costs along with any other outstanding financial commitments. Most bridging loans enable you to roll up the interest so the interest you pay each month is added on to the total amount you owe.
What choice of Bridging loans are available?
You can organise a fixed or variable bridging loan. If you need to roll up your interest repayments, you will have to go for a fixed bridging loan. In most cases the rates you pay are fixed for the loan term, and this can be as short as one month or up to one and a half years.
What other costs are there?
You must pay valuation costs and the solicitor fees. The lender may also charge 1-2% of the amount you borrow for their arrangement fee.
What is the bridging loan ‘Exit Strategy’?
The Exit Strategy considers how you will repay the Bridging loan at the end of the term, or earlier if you are able. An example of an exit strategy is if you remortgage away from the Bridging Lender, this is possible if you intend to keep your property. In this situation you would get a mortgage agreement or decision in principle from a conventional mortgage lender.
Errol Hall, Thomas Oliver mortgage and protection adviser in Cricklewood North London and Saffron Walden Essex said:
Bridging loans are particularly useful for clients who want to secure their property and are concerned their property chain may collapse. You may be able to get a bridging loan with a bad credit history, but we recommend you speak to an adviser regarding this.
One of the great advantages of taking out a bridging loan is you can get access to the funds you require very quickly. If you call one of our Thomas Oliver mortgage brokers, we will discuss and explain how bridging loans work. If we think you are eligible to apply for one you can normally organise a bridging loan very quickly, completing on it within one or two weeks. This compares to two to three months on average for a conventional mortgage.
Although bridging loans provide very quick access to short term cash, they are very expensive compared to other mortgages, so we make sure you can repay them on time and we encourage you to repay them before the end of the term if possible.
If you would like to apply for a bridging loan please get in touch with me, at Thomas Oliver UK. I have extensive knowledge of Bridging loans and access to a wide range of products and lenders.
The best point of contact is my mobile on 07944 088 735, or you can email errol.hall@thomasoliveruk.co.uk.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. Some Bridging Finance is not regulated by the Financial Conduct Authority.
