Bridge Finance
What is a bridging loan?
Bridge loans are a short term solution, which are often used to ‘bridge’ a gap when you are looking to buy a home until a more permanent or next stage of financing can be arranged or agreed. This financing is then used to repay the bridge (often known as the exit route or exit strategy).
Before securing a bridge loan it is important that you carefully consider your plans and be sure there is a suitable exit route available. This type of borrowing is generally only arranged over a 3, 6, 9 or 12 month period, so it’s extremely important to look past the initial bridge itself.
Exit strategies for a bridge loan could include the sale of the security property, refinance to a normal mortgage product, sale of another asset or funds from many other sources as overall the bridge provider’s main focus is that the exit is a feasible one.
Bridging loan interest rates are typically monthly rates (as opposed to annually calculated rate on long term finance such as a mortgage or loan) and vary depending on various factors. However, it is fair to say that when compared to most mortgage rates a bridge rate is much higher.
Maybe you have a great opportunity to buy a property to refurbish, but can’t arrange a mortgage due to its condition? Or perhaps you have a property you need to purchase before your deposit is released from your own property sale?
We do not provide advice in relation to Bridge Loans here at Roberts McBain. However, we can refer you to Alpas Finance Ltd who can access a wide range of specialist lenders, provide their own impartial advice and arrange Bridge Finance on your behalf. Please note that any advice provided by Alpas Finance Ltd is completely separate to any advice provided by Roberts McBain Ltd
'Open' or 'closed' bridge loans
A closed bridge loan is commonly used when a buyer has found a property already and has exchanged on the sale of their existing property. A closed bridge loan will usually have a fixed repayment date or exit strategy.
However, an open bridge loan is commonly taken out by a buyer who has found their ideal property but may not have put their existing home on the market, or they may not have had any offers on their property yet.
This type of bridging loan can often be considered a higher risk and will usually have a higher rate of interest in place. This means that lenders will need to understand how you are going to pay off this loan, so are likely to ask for evidence to confirm you can pay back the loan successfully.
Here at Roberts McBain Mortgage & Finance Ltd we have work with specialist packaging companies and advisers such as Alpas Finance Ltd that can talk through your objectives, assess your specific needs and provide advice on both regulated and non regulated Bridge Finance.
This is a specialised area of lending and the companies we work with have routes to some of the most credible, well established and competitive bridge providers in the UK.
Remember - A bridge loan is likely to be more expensive for every pound borrowed, compared to loans that are taken out over longer terms. It is therefore important to make sure this is the right option for you and that there is a feasible exit (way of repaying the loan) strategy in place.
Your home / property may be repossessed if you do not keep up repayments on your mortgage
Think carefully before securing any other debts against your home. Your home/property may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it
The Financial Conduct Authority does not regulate some forms of buy to let mortgage and some forms of bridging finance.
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