Are you looking to move homes and need some quick cash to help facilitate your move?
Well, you can try checking out bridging loans. They’re short-term solutions to short funding gaps. You can use these loans to help facilitate purchasing an estate that you wouldn’t be able to buy otherwise.
Unlike other loan types, bridging loans are more costly since they have high-interest rates (the loan providers assume that you’ll quickly pay off your debt).
What's a Bridging Loan?
How Do Bridging Loans Work?
Where Can You Get Bridging Loans?
There are various types of bridging lenders – from individual plan providers to larger, professionals regulated by the city watchdog, the FCA2.
If you love structure and are looking for a straightforward lender, ensure that you use an FCA-regulated broker since they’ll only recommend taking out a bridging loan if it’s your only and best option available.
Things You Need to Consider When Taking Out a Bridging Loan
Varying Interest Rates
Financial institutions are taking longer to process claims for substantial home loans. There has been a constant increase in the number of people opting to take out bridging loans rather than the standard home equity loans.
While they’re highly useful when you use them for property investments, acquiring buy-to-let estates and developments, they can cause a myriad of issues for lenders. Therefore, it’s essential to recognize that bridging loans aren’t the most straightforward or most ideal alternative to mainstream lending.
Taking a bridge loan can also lead to future rejections when you want to take a mortgage. It can also rake up some hefty additional legal and administration fees. Therefore, you need to tread cautiously when taking out bridging loans. You should also ensure that your circumstances are suitable to apply for the bridge loan.
How to Get the Best Bridging Loan
When you decide to take out a bridging loan, you need to ensure that you consider the following:
The Amount You NeedYou should set up a budget and know how much money you need. Lenders today are offering bridge loans with a minimum limit of €5,000 and a maximum of €2.5 million.
The Estate ValueIt would help if you had an accurate and up-to-date assessment of your property as it’ll affect how much you can take and how much it’ll cost.
The Loan PeriodA bridging loan can last between one month and over two years. So, knowing how long you’ll need to repay it is essential. It’ll help you determine whether you should take the closed or open loan.
MortgageIf your mortgage out your estate, it means that your borrowing amount will be affected. It’ll also determine if you’re liable for the 1st charge or 2nd charge loans4. You can only take out the 1st charge loan if you don’t have any outstanding borrowing amount attached to your property.
Frequently Asked Questions
Everything you need to know about bridging loans.
When it’s approved, you’ll have the funds within two weeks. If you, however, need it urgently, you can pay some additional funds to speed up the process.
Some lenders will still consider your application even if you have bad credit. However, it would be best if you prepared for your eventual loan to be more costly.
The closed loan involves a set exit or repayment date, while the open loan meaning borrowing for an extended period. It doesn’t have any set exits or repayment dates. With that said, the closed option tends to be less costly.
Applying for the loan can be fast. You can apply it online and find out if you’ve been successful within 24 hours.
A bridge loan is a secured loan, meaning that you have to offer them an asset as your security. Some plan providers accept land as security, instead of an estate.
If you have an existing mortgage or loan on your home, you need to take out the 2nd charge loan. Otherwise, you can take a look at 1st charge loans.