For anybody wanting tips to access bridging loans UK, then this article will help.
Firstly, a bridging loan is a form of short-term finance and it is used by a business or an individual for meeting a need for funds.
Essentially, a bridging loan will help to bridge the gap between a debt falling due and the availability of credit or a house sale, for example.
A bridging loan in the UK is usually known as being a financial vehicle that helps those wanting to buy a property before they sell their current home.
They work by offering fast access to large sums of money that not only help secure a residential property but they can also be used to keep a business afloat.
Bridging loans are quick and easy to access
However, while bridging loans are quick and easy to access, they will have a higher rate of interest when compared with long term funding products, such as mortgages.
The rate of interest being offered on bridging loans will be based on how much is being borrowed and how much the security property is worth.
And one reason why bridging loans have grown in popularity in recent years is that they can be arranged for a few days and up to two weeks.
They tend to run for up to one year ago and some lenders will offer bridging finance for up to two years.
Those that tend to use this form of alternative finance are usually property developers, landlords, and investors who want to secure a property, particularly if they are buying at auction.
Access to a bridging loan
Indeed, having access to a bridging loan means someone can bid on a property in an auction and arrange the funds to purchase it before the auctioneer’s deadline is reached.
There may also be a need for a business to access working capital so they can cover their ongoing running costs and also payroll requirements.
They can then repay the bridging loan when they have the funds to do so.
Other ways to use bridging loans include:
- In addition to buying property at auction, a bridging loan can be used by those who may not meet the lending criteria of a high street bank
- Bridging loans can be used to redevelop, renovate or refurbish a property, so it can be quickly sold on or attract a mortgage
- They are also a good vehicle for short-term refinancing needs, particularly for landlords who may not be able to renew a commercial mortgage that matures and the loan will help give time to complete the process for a new mortgage or to renew tenancy contracts.
- Property developers may use them to help finish a project should their funding run out and they need to quickly access extra funds.
Bridging loans in the UK
Other reasons to consider bridging loans in the UK include:
- Bridging loans tend to be for a short period and will need to be repaid in full as soon long-term financing lands
- The funds enable the borrower to enjoy breathing space before selling a property or arranging longer-term finance
- These loans offer some control over their repayment options
- Bridging loans are quick to arrange since high street lenders have tightened their lending criteria
- They help offer leverage should someone be buying a property with cash.
And while bridging loans are growing in popularity, there are some disadvantages.
For example, they have higher rates of interest and are more expensive than a traditional mortgage and many will have additional administrative and legal costs to pay.
Among these will be a charge from the lender to arrange the finance plus there will be a need for the security property to be surveyed by an independent surveyor and the borrower pays these fees.
Bridging loan rates
While on the subject of bridging loan rates, it’s important that a potential borrower does not focus on those loans offering the lowest rate of interest – there are other cost considerations too.
You really should use the online bridging loan calculator that most lenders will have on their website or work out how much a loan with a lender will cost over the full term.
The calculator will take into account the loan’s value, the rate of interest, the loan’s term as well as the additional charges and administration fees. Be aware that some lenders will also charge an exit fee on the loan falling due.
While there are lots of good reasons to recommend bridging loans UK to a wide range of potential borrowers, it’s always worthwhile seeking advice from those who understand how this market works and who can explain more about whether this type of financing will meet your needs – so you should contact the team at The Bridge Crowd today.