For anyone interested in bridge funding then this helpful article will be useful and there’s also an appreciation of what second charge loans are.
Bridging loans are used by those who are needing a short-term and quick capital injection to fund either a property purchase, a property refurbishment or they might be wanting to buy stock for a promotional business opportunity.
There is no limit to what bridging finance can be used for, it can even be used to pay a hefty, unexpected tax bill but what happens if you already have a mortgage on a property?
This means you may be looking for a second charge bridging loan and it might be possible to access this finance quickly and efficiently too.
Just to help with the clarification, the difference between a first and second charge loan is that the first charge is the primary loan or mortgage that has been secured against a property and the lender will take precedence when it comes to being repaid should you default.
When there’s enough equity in the property then it is possible to have a second charge loan secured against it which means the lender will be repaid after the first charge has been cleared.
Applying for a bridging loan on a second charge
When it comes to applying for a bridging loan on a second charge then the process is quick to complete. This is one of the big attractions for bridging finance as opposed to applying for a new mortgage or a loan with a high street lender.
Since the lending criteria have been tightened up in recent years by high street firms, means greater numbers of businesses and people are looking at bridging finance to fulfill an urgent financial need.
The application process for bridging finance can be completed within a week or two and if the lender already has a relationship with a borrower, for instance, a property developer, this process can be completed in just a few days. That’s of huge help to those wanting a large sum of money quickly.
However, the market for bridging loans is a competitive one and there are lots of lenders offering deals so it will pay to shop around and perhaps to use a specialist broker who understands how the market works and particularly how it works for those wanting a second charge loan.
That’s because there’s a greater level of risk to a lender offering second charge loans which means they will charge more in interest and not all bridging finance firms will want to offer money for this purpose.
Wondering whether you will be accepted for a bridge loan?
You may be wondering whether you will be accepted for a bridge loan and most lenders will carry out credit checks to ensure they will get repaid. Not all bridging firms will carry out these checks and for some even having CCJs or having defaulted on credit previously will not put them off.
It’s also possible to access a second charge bridging loan without having repaid your current mortgage though you will need permission from the lender who has the first charge over the property for this.
The interest rates being charged by bridging finance firms also vary depending on the risk involved, the amount being borrowed and the length of time you will need the money for.
All firms have their own lending criteria but they will have a bridging finance calculator on their website to help you decide whether their offer is the right one for you.
It’s important to appreciate that the interest rate for a second charge loan will be slightly higher than for a normal bridging loan because the lender is facing a higher level of risk.
Also, bridging finance tends to be a short-term arrangement, usually up to 12 months but some lenders will offer money for up to two years – for the second charge loans, most lenders will be looking at a 12 months maximum loan period.
Bridging firm’s online finance calculator
The bridging firm’s online finance calculator will also reveal the other fees and charges that you may be liable for including an arrangement fee and the rate of interest.
However, as we have explained, one of the reasons why bridging finance has grown so quickly in popularity is that the loans are quick and easy to access though there may be a need for a surveyor to provide a valuation of the property and this fee will be paid by the borrower.
It’s always important to understand the pros and cons of bridging finance and to seek independent financial advice though the helpful team at the Bridge Crowd are specialists when it comes to second and third charges for bridging finance. There’s also the possibility of equitable lending too.
One important part of the application process is to obtain consent request from the lender holding the first charge and the case managers at the Bridge Crowd have excellent relationships to get these consents quickly.
For any questions about bridge funding and second charge loans, then the Bridge Crowd team can help.