Just as there are a variety of different bridging loans available there are also a range of bridging loan interest rates UK too.
Essentially, a bridging loan is a method of arranging short-term finance for funding a particular purchase, usually a property, before the longer term funding is finalised.
This means that the buyer of a property, for example, is using the loan to ‘bridge’ the gap between the selling of their home and the completion date for buying their next one.
Effectively, a bridging loan enables a homeowner who may be struggling to find a buyer for their current home to move into a new property before they actually sell their existing home.
So for a short period, the person who is taking out a bridging loan will actually own two properties at the same time; this also means they may have a large amount of secured debt to deal with.
Variety of bridging loan rates being charged
As mentioned previously, bridging loans can be used for a variety of purposes so it follows that there will be a variety of bridging loan rates being charged.
For example, someone who takes out a bridging loan will probably face a higher rate of interest than they would pay for a traditional mortgage and it should be remembered that because the loans are short term that the rates are usually expressed on a per month basis.
So when a bridge loan provider says their rate of interest is 1.5%, the borrower should appreciate that is the monthly rate which means the APR is 18%.
In addition, there will also be an administration fee to pay which could amount to 1% of the loan’s value to arrange and another 1% charge, potentially, to exit from the bridging loan. These charges are in addition to the interest being charged.
The bridging loan rates UK
However, the bridging loan rates UK can also be variable or fixed, just like with mortgages.
This means that a fixed rate for a bridging loan means that the same rate of interest is applicable across the loan’s term so the monthly repayment is the same.
A bridging loan with a variable rate, for instance, means that the interest may change so the repayments during the loan period could go down or up.
Essentially, for anybody wanting to know what the bridging loan interest rates UK are, then each lender will specify exactly how much they will be charging and this article explains the terminology they will use and what a borrower should be expected to repay.