Despite bridge funding growing rapidly in popularity not everybody understands them and so this article will explain all they need to know about UK bridging loans.
One reason for the rapid rise in popularity is that they can be used for a wide range of purposes and not just for buying and refurbishing property; there has also been a big leap in the number of bridging loan providers entering the market.
The first issue that anybody thinking of this short-term flexible finance needs to appreciate is the bridging loan interest rate; there is no set rate which will vary from lender-to-lender and also on the loan’s purpose and the borrower’s circumstances.
UK bridging loan providers
In addition, UK bridging loan providers also have a variety of loan-to-value (LTV) criteria so some will lend proportionally more than others while some may restrict how much they are prepared to lend to an applicant.
It’s always important to appreciate that a bridging loan is only intended to be a short-term finance vehicle which also explains why the interest rates can appear to be slightly higher than from high street banks, for instance.
Other terminology used include understanding administration fees which is the fee charged by a finance broker for arranging the loan.
Bridging loan exit fees are charged by some lenders, not all of them, when the loan ends; it’s an amount added to the borrower’s final repayment. Most lenders have no exit charges.
Bridging loan UK lender’s fee
There’s also the bridging loan UK lender’s fee which is a proportion of the amount being borrowed. This could be anything from 0% to 2% and is included on the bridging loan costs.
A potential borrower can also expect to pay their own and the lender’s legal costs for them to arrange the bridging loan and these fees vary between lenders.
Bridging loans are also available with the interest ‘rolled-up’ which means there is no interest to repay until the loan falls due and the interest is charged in full otherwise interest can be repaid every month.
Finally, some lenders have valuation fees which will be necessary for a property valuation before the application for a bridging loan can be completed. The fee will usually need to be paid upfront.
For those interested in UK bridging loans and would like to know more, contact the helpful team at The Bridge Crowd.