Bridging Loan Rates UK

When it comes to learning about bridging loan rates UK it is important to understand what this type of finance is for and how much the costs will be.

A bridging loan is a way to bridge the financial gap between someone making a purchase and the money for that purchase becoming available.

Most people know bridging loans from when they buy a house so when the house they want needs to be paid for, they can use a bridging loan and be confident the money to repay the loan will occur when their own home sale takes place.

Bridging loans are also popular with property developers and landlords to help fund projects though they are also growing in popularity with businesses as well who may be looking to cover a gap in cash flow or to buy stock.

Property developers buying a property at auction also access bridging loans since they can secure a large amount of money quickly and meet the deadline for paying the auctioneers.

Discuss the bridging loan rates that are to be expected

Before we discuss the bridging loan rates that are to be expected, it’s important to understand the types of bridging loan that is available.

Essentially, there are two types and the first is an open bridging loan which is finance that has no set end date and tends to last for one year though they can be for longer.

The other type is a closed bridging loan which does have a fixed end date so the borrower knows when they will have the money available to repay what they owe the bridging lender.

The other subtle difference is that an open bridging loan tends to be more expensive than a closed bridging loan because they offer the borrower more flexibility.

Also, the lender will be wanting to know the borrower’s exit route when they apply which is a way of asking how they intend to repay the loan regardless of the type they choose.

A bridging loan is a type of secured loan

Essentially, a bridging loan is a type of secured loan which means the borrower will need to own land, property or another high-value asset to get their loan.

It’s also important to realise that there’s no set rate of interest for the loan since the rates vary between lenders and for the loan’s purpose and as well as the loan’s size.

As with all loans, there are pros and cons with bridging finance and with them growing in popularity means lots of people are increasingly seeing the positives of using them.

For instance, a bridging loan has a fast application process, certainly quicker than high street banks, and borrowers have access to flexible borrowing and can access large amounts of money.

However, the downsides include having to pay administration fees, having to secure the loan against an asset such as property and also relatively high-interest rates.

The uses for bridging finance

Having mentioned the uses for bridging finance, other borrowers can also use them for a business venture, having to pay an unexpected bill, such as a tax demand or paying for a divorce settlement and also investing in a buy to let portfolio.

So, let’s discuss some of the charges a borrower may expect when they apply for a bridging loan and this will include a charge being added to their property or security to ensure the debt will be repaid should the borrower be unable to do so.

Some lenders will also be interested in offering a second charge on an asset, such as when a mortgage or a loan is already listed against it.

The next issue is to appreciate that lenders tend to charge interest on a monthly basis because bridging loans tend to be taken out for short periods of time.

This means they tend not to quote the annual percentage rate (APR) for a loan and the amount given is for the monthly rate of interest.

Bridging loan interest rates UK being charged by lenders

Again, it’s important to understand that the bridging loan interest rates UK being charged by lenders will be done monthly and added to the balance of the loan for repayment, other lenders will offer the borrower a chance to defer the interest, or ‘roll-up’ the payments.

This means the interest is repaid when the loan ends and there’s no need to pay monthly repayments during the loan’s term.

This also means it is important to shop around to find the best rate of interest being charged on a bridging loan by a lender since the amounts vary.

However, it’s also important to consider using a bridging loan calculator and most lenders offer the facility on their website since this will show the borrower how much the loan will actually cost.

The calculator will reveal the arrangement or facility fee which is between 1% and 2% of the loan’s amount. Some lenders charge exit fees should the borrower repay the money early, while others add administration costs as well.

The purpose of the bridging loan

Depending on the purpose of the bridging loan, there may also be legal and valuation fees to pay and some borrowers may also need to pay their broker or introducer fees.

Most potential borrowers of bridging loans will also be interested to know how much they can borrow and the rates vary between lenders and a lot will depend on the value of the security being offered.

However, most lenders will offer anything from several thousand pounds to several million pounds.

 

Essentially, when it comes to learning more about bridging loan rates UK, there is no set answer because there is no set financial product to meet the borrower’s needs and with the variety of lenders and financial offerings available means it will pay to shop around to find a loan that suits the borrower at a rate of interest they find attractive.

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