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.
We always consider the alternatives to bridge finance, such as borrowing through a standard mortgage and look at options for mortgages, remortgages and further advances before considering a bridge loan for our clients. This is because a bridge loan generally carries more risk than the more standard borrowing options.
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?
Why not get in touch and let’s see if a bridge loan can help ‘bridge’ your short term needs.
'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 the advantage of being regulated by the Financial Conduct Authority and can arrange regulated and non-regulated bridge finance, giving you a range of options to suit your needs.
This is a specialised area of lending and we 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 property may be repossessed if you do not keep up repayments on your mortgage
The Financial Conduct Authority does not regulate some forms of Buy to Lets, Wills, Trusts and Overseas Mortgages. The Financial Conduct Authority does not regulate commercial finance, secured or unsecured loans and will writing
LET US HELP YOU
We're happy to answer any questions that you might have, just drop us a line!