Whether you are looking to buy a property or need a short-term loan for a pressing need, then you may need to learn more about a UK bridging loan to meet your requirements.
Traditionally, bridging loans were used to help home-buyers purchase a property before they had sold their current home by offering access to money over the short term at a high rate of interest.
This then ‘bridges the gap’ between the sale of their home and the completion date of their new one.
However, since lenders can arrange bridging loans quickly, they also have proved popular for those who want to buy property at auction, for example.
That’s because a developer or a buyer can place a bid on the property knowing that they can arrange the finance in time to meet the auctioneer’s deadline.
Others may simply be needing to access a short-term loan to refurbish a property to sell on or to bring it up to a standard that will attract a mortgage.
There’s no doubt that building societies and banks have become reluctant to lend money following the financial crisis and they’ve tightened their lending criteria as result.
Bridging loan UK lenders
This has made accessing loans more difficult and there’s been a growth in the number of bridging loan UK lenders willing to offer money to those who have security, usually a property, to access cash.
Since these loans are aimed at fulfilling a short-term need they tend to have a higher rate of interest and this is usually expressed on a monthly basis.
In addition, there may be administration fees as well as the surveyor’s fees for valuing the security property to pay.
However, for those asset-rich borrowers who want to access liquid funds quickly, for example, to pay their tax bill or exploit a financial opportunity, then the opportunity that bridging finance brings will help them meet this need.
Others who use bridging loans include property investors as well as landlords wanting to develop their buy to let portfolio.
However, one of the issues when applying for a bridging loan is that you need to understand what your exit strategy will be.
The bridging loan rates UK being charged
This will also have an impact on the bridging loan rates UK being charged so you will need to know how and when you will be able to repay the money.
As an example, a property developer may be accessing funds to develop a property for a mortgage, which is when they will know how they will repay the finance.
The other big attraction is that for those who have used a bridging loan lender previously and have a good track record for repaying, can access big sums of money in just a few days.
Other applicants may see their application process take a week or two, while the lender carries out careful checks and arranges the legal paperwork.
It’s worth researching the opportunities that bridging loan lenders offer and these come in all shapes and sizes offering sums ranging from several thousands of pounds with other lenders offering tens of millions of pounds.
The criteria lenders will have will also vary with some carrying out more detailed checks on applicants than others and some may not be too bothered that the applicant has previous bad debt history.
Security property being used for the bridging loan
Obviously, a lot depends on the security property being used for the bridging loan and since most lenders will offer a maximum LTV of 75% on the gross loan amount that the applicant can borrow means the total amount will be restricted by the property’s value – which is assessed independently.
As mentioned previously, bridging loans tend to be over the short term so you can access large amounts of money for anything between one month and up to 24 months, depending on the lender’s criteria.
Most lenders will offer up to 12 months, though you can repay the loan early and most lenders do not charge an exit fee when doing so.
Bridging finance firms will have an online calculator
It helps too that most bridging finance firms will have an online calculator to help you work out whether this type of alternative finance is for you and whether it will meet your needs.
The calculator will look at the type of bridging loan, the term and the value of the security property along with the loan amount. All the fees will also be listed.
The rate of interest will vary depending on the amount being requested and the value of the security property as well as the applicant’s circumstances.
While the bridging loan calculator is a useful tool, there may be other issues you need to discuss and the team at the BridgeCrowd can help you understand more about accessing a UK bridging loan.