Discover Bridging Loans With our Guide to Buying Property

Fast financing is crucial when opportunities arise in property development or during property auctions. Our bridging loans offer a solution when time is of the essence. Unlike a traditional bank or high street lender loans, which can take months to secure, bridging loans can be arranged in just a few days. 

It enables you to quickly secure your investment opportunity and prevent the possibility of losing the deal. Bridging loans are becoming increasingly popular among property buyers who need to act fast. This article will discuss bridging loans and how they can be used for various property purchase scenarios.

What Is A Bridging Loan? 

Bridging loans are a quick financing solution for property purchases, with a typical duration of 6 to 18 months. They are designed to fill the gap by providing borrowers with fast access to the required funds. Bridging loans are more accessible than traditional mortgages and standard bank loans, and borrowers can obtain them with lower credit scores, income levels, and even limited financial documentation.

How Does A Bridging Loan Work? 

A bridging loan, also referred to as gap financing, is a temporary funding solution that differs from a traditional mortgage. Instead of providing fixed payments over an extended period, bridging loans offer a flexible structure that allows for interest repayment, with the option to repay either monthly or at the end of the loan term. These loans can be obtained from peer-to-peer lending platforms or specialized bridging lenders and require a solid exit strategy and a property to serve as collateral.

Can You Buy A Property Using a Bridging Loan? 

While most investors use bridge loans to buy commercial or residential properties, purchasing a primary residence home is possible using funds from bridging loans. Such loans offer more flexibility and accessibility for those who want to purchase a property but are waiting for the funds to become available by selling an existing property. There may be better options for first-time buyers, but it can serve other types of homeowners.

How To Find The Right Bridging Loan for Property Purchase? 

Before seeking a loan for a house purchase, it is important to keep the following considerations in mind:

Check the Loan Type You Need

The appropriate type of bridging loan for your situation will depend on various factors. There are two main types of bridging loans:

Open Bridging Loan 

These bridging loans lack a fixed repayment period, giving you the flexibility to determine the amount and timing of payments. Repayment can be made whenever funds become available, such as after the sale of your house or clearance of inheritance probate. However, they often come with higher interest rates due to the higher risk they pose for the lender.

Closed Bridging Loan

These bridging loans have a predetermined cutoff date based on your knowledge of when you will have the necessary funds to repay the loan. Closed bridge loans are typically short-term, lasting only a few weeks or months. If the deadline is not met, a penalty fee may be imposed.

Work On LTV You Require

To determine the amount of loan needed for a property, calculate the percentage of the property's value that the loan will fund. For instance, an LTV (loan to value) of 60% on a £200,000 property will result in a loan of £120,000, with the remaining £80,000 to be provided by the borrower. Our comparison displays the highest LTV offered by each provider. If you have an existing mortgage on the property, you may receive a lower LTV, referred to as a "second charge" loan.

Consider The Extra Cost

Before committing to a bridging loan, it is crucial to know all the extra costs and fees associated with it. These costs can be substantial, so include them in your affordability calculations.

• Facility fees: They may be as much as 2% of the loan balance.

• Legal costs: Some lenders demand that you pay their legal fees and your own.

• Exit fees: can be assessed fees for early loan repayment. These typically amount to 1% of the outstanding loan.

• Valuation fees: to get your property valued by a surveyor

• Broker commission: Brokerage fees for arranging the loan

When To Use A Bridging Loan For Property Purchase? 

A bridging loan can be set up quickly and enables you to behave like a cash buyer when you need to move rapidly.

• When you need to move fast - You can behave like a cash buyer by using a bridging loan, which can be established rapidly.

• It's flexible - Lenders will consider borrowers with less-than-perfect credit histories because it is secured against the value of bricks and mortar.

• Different property types - Building plots, residential and commercial real estate, or even undeveloped land may be used as collateral for bridging loans.

Conclusion 

In conclusion, bridging loans are flexible and quick financing for property purchases. They offer a way for borrowers to secure their investment opportunities without the hassle of long wait times for traditional bank loans. These loans can be used for various property scenarios, including purchasing primary residences, commercial properties, and even undeveloped land. 

However, it is important to remember that additional costs and fees are associated with bridging loans, such as facility fees, legal costs, exit fees, and broker commissions, which should be factored into affordability calculations. When considering a regulated bridging loan, it is crucial to determine the right type of loan, the loan-to-value ratio, and the extra costs involved. Bridging loans can be a useful tool for those who need to act fast, offering flexibility and accessibility to secure their investment opportunities and prevent the possibility of losing a deal.