This final part in our ‘All you need to know’ series focuses on GG GG since short term bridging finance is growing quickly in popularity.
Most lenders also offer an easy way for a potential borrower to decide whether a bridging loan is right for them and, more importantly, what the costs for it will be.
This is why bridge loan lenders provide a bridging loan calculator on their website and they are straightforward to use by entering the amount of money required, and then selecting the relevant loan to value amount, though most lenders will only loan a maximum of 75%. If the borrower needs more then they will need to negotiate directly with their lender.
It should also be appreciated that when using one of these calculators that interest is generally ‘rolled up’ so the final figure is the settlement amount needed to exit the loan.
Bridging loan lenders will also need the borrower to pay valuation fees
Some bridging loan lenders will also need the borrower to pay valuation fees and these will depend on the property type, its location and value. Again, surveyors charge at different rates and the lender will need to find an acceptable surveyor for their needs. These fees will need to be paid before the loan is completed.
Another aspect that potential borrowers need to be aware of is that some bridging loan providers will charge an exit fee, and sometimes these can be high. Not many lenders to charge these but it is always wise to check.
Along with the growth in popularity for bridging loans, lenders have also expanded their portfolio of products over the last few years which means they have something to meet just about every need. They’ve also done so because many building societies and banks have tightened their lending criteria for mortgages.
Bridging loans are also popular
As mentioned previously, bridging loans are also popular because they enable the borrower to roll up the repayments and it’s also possible that the bridging loan could be folded into a mortgage which will be repaid at a lower rate of interest.
Bridging loans undoubtedly offer flexibility with access to large amounts of money at short notice though borrowers need to appreciate they cost slightly more and they will need their exit strategy in place to know how they will repay the short term loan.
With more lenders come into the market, competition is increasing which means it pays to shop around and find the best rates and best level of service.
Hopefully this short guide has provided more detail about what bridging loans are and what they can be useful but for more information and advice, contact the helpful team at The Bridge Crowd.