In order to get the best bridging loan rates UK, then applicants will need to do some homework first.
Bridging finance has grown in popularity in recent years and there’s a wide range of bridging finance products available.
Most people will be aware of bridging loans that are used typically to help ‘bridge the gap’ between the sale of a property and the purchase of a new one.
While bridging loans can still be used for this purpose, the range of loans has extended to include raising capital for a business purpose or to help someone pay a tax bill.
However, it is advisable to use a bridging finance calculator to see how much this type of loan will cost to see whether this type of product is suitable.
Bridging loan interest rates UK
Indeed, the bridging loan interest rates UK will vary and the potential borrower will see that even a small fluctuation in the rate of interest could have a big effect on the monthly payment.
One of the issues for interest rates is the LTV that the lender is working to on the value of your security property that will dictate how much you can borrow. While most bridging lenders will offer 75% on the gross loan, others will offer much less.
While you could have more than one security property to access a large amount, you need to ensure that there’s enough equity available for meeting your needs.
Usually, bridging finance is aimed at those who are needing a short-term loan, usually up to 12 months and others will offer bridging finance for two years.
It’s also important to appreciate that there is no minimum term and it may be that you need the money for a day or so but you’ll still need to pay the fees and interest.
It’s because of their short term nature that bridging loan rates in the UK tend to be higher than for other types of borrowing.
The bridging loan rates can also be variable or fixed so a variable rate will fluctuate, while a fixed term rate will last for the duration of the loan.
It’s also possible to roll up, or defer the interest and pay when the loan is due as a lump sum.
The difference in bridging loan rates
It’s the difference in bridging loan rates between lenders that highlights that potential borrowers really should shop around but comparing deals on a like-for-like basis can be confusing.
It helps that most lenders will have a bridging loan calculator available on their website and if you’re still confused about how to compare bridging loans, then the team at The Bridge Crowd can offer some advice.
The other issue when looking for bridging finance is how much you can borrow.
The amount will vary depending on lenders with some offering thousands of pounds, and others offering millions of pounds.
The amount borrowed will also have an effect on the interest being charged and borrowers need to appreciate that the application process is much quicker than for high street lenders.
Bridging finance interest rates
The bridging finance interest rates do fluctuate and this is a competitive market, so it may be possible to find a better deal from another lender.
Another issue for the net rate of interest is to understand what your exit strategy will be from the loan.
While bridging loans are offered on a short-term interest only basis, then your exit strategy will influence the lending decision.
This boils down to two issues and the first is knowing when you can repay the loan, this will be a ‘closed’ loan, while someone else may not know when they will have the money available for repayment. This is known as an ‘open’ bridging loan.
The difference between the two will also see a lower rate of interest for a closed exit strategy since there is a lower level of risk for the lender.
Bridging finance is a popular choice
Despite the rate of interest and the administration fees, bridging finance is an increasingly popular choice for borrowers for a range of reasons.
In addition to a quick application process, lenders will have various criteria as to whom they will lend and some, for example, may not even carry out a credit check, or ask what your personal income is.
Another option to access the better finance rates is to have a strong property for the loan to be secured against.
The location and the property type will also have an impact on its saleability which will make the deal more attractive to a bridging provider.
It’s probably best to discuss your needs with a bridging loans expert – so contact the team at The Bridge Crowd to find out more about the best bridging loan rates UK and how the bridging loan process works.