Bridging Loan Rates

One question for anyone interested in bridging finance will be about the bridging loan rates they will be facing.

This article will explain all that you need to know about bridging loan rates and the potential costs for this type of alternative finance.

Firstly, for those who may not appreciate what a bridging loan is, it’s a quick way to access a large sum of money and has been traditionally used by a borrower wanting to buy a home, while they sell their current property.

Usually, a bridging loan is for 12 months, though they can be for 24 months. This short-term access to a lot of money will come with a higher rate of interest.

Also, bridging finance has grown hugely in popularity because building societies and banks have tightened their lending criteria since the financial crisis.

This means that there are opportunities to borrow from a growing number of bridging lenders and there will be a wide range of rates being offered for their loans.

In addition, there will be an administration charge to pay and some lenders will have an exit fee.

Factors affecting bridging loan interest rates UK

The factors affecting bridging loan interest rates UK will include:

  • How much the security property is worth
  • The rate will depend on whether this is a first or second charge loan
  • The loan rate may be available as fixed or variable rates to meet your needs
  • The rate will also depend on the type of loan you access.

This last point could see a big difference in the loan rates being quoted since the lender will want to know what your ‘exit route’ is going to be.

This essentially means that if you know when you will have the funds to repay the bridging finance, then this is known as a closed bridging loan and it tends to attract lower rates.

Also, these loans are generally settled within a few months.

For those who do not have an exit plan or know when they’ll have the funds for settling the loan, then this is an open bridge loan and will have higher rates.

Borrowers need to appreciate that bridging loan interest rates tend to be higher than they are for traditional lending but they have the convenience of being easier and quicker to access.

Purposes of a bridging loan UK

The purposes of a bridging loan UK are varied and include:

  • The buying of property
  • Developing a property for selling
  • Investing in buy to let opportunities
  • Paying outstanding tax bills.

Essentially, most bridging finance firms will have no restrictions on what the money can be used for which many borrowers will find helpful, particularly since they can access very large amounts, up to £1 million or even more, at short notice.

However, while there are lots of advantages to accessing bridging loans, potential borrowers also need to appreciate some of the downsides which include higher rates of interest, the addition of fees from the lender and the security property is at risk if you cannot meet repayments.

The lender will usually have a bridging loan calculator on their website to show how much a potential loan will cost over its term.

There will be an arrangement fee, usually expressed as a percentage for setting up of the loan. It’s usually between 1% and 2% of the loan’s amount.

Also, some lenders will have an exit fee, which can be around 1% of the loan.

We mentioned previously that bridging finance is quick to access and it’s helpful that applicants will know within 24-hours whether the loan will be approved.

After that, it can take up to two weeks for the various checks to be carried out, including an independent survey of the security property to ensure a correct valuation.

It also needs to be appreciated that bridging loans can be a complex product and you really should choose to work with a reputable firm – such as The Bridge Crowd.

Also, you need to be wary of any hidden charges and ensure you know what the total cost will be from the outset and it’s always a good idea of your exit strategy.

Finally, the bridging finance sector is a competitive one, so it’s worth shopping around to find the best interest loan rates as well as the better terms that will suit your needs.

If you need to know more about bridging loan rates and what these loans can be used for, then you need to speak with the experts at The Bridge Crowd.




Everything You Wanted to Know About Bridging Loan Rates