For many borrowers, UK bridging loans are an effective way to access finance that they may be needing to plug a financial gap.
This gap is the period between them having to pay for a debt and having the money or credit available to repay.
So, rather than missing out on an opportunity, such as buying the home of their dreams, an applicant can access a bridging loan to access the finance necessary.
This means that the loans tend to be for a short-term to facilitate this transaction so the borrower has the money to buy their next home, for example, until they are able to sell their current property.
UK bridging loan
And while a UK bridging loan is usually for those who are buying property, they are also available to investors and landlords, so they can be used for:
- Property investment purchases
- Buy to let property
- Property development
- Buying a home.
This means that for someone who wants to buy a property at auction, for example, then they can do so confidently knowing they can meet the auctioneer’s deadline for paying their bid amount.
Others may decide to buy a rundown property that may not attract a traditional mortgage and use bridging finance to carry out renovation work so they can sell it on for a profit.
For those who are interested in bridging loans, then you need to appreciate that are two types available.
They are known as ‘open’ and ‘closed’ bridging loans and have an effect on the rate of interest being paid.
If you are interested in bridging finance but do not know when you have the funds to repay the money, then this will be an open loan.
For those who do know when they will have the money available to repay their finance, this is known as a closed loan and tend to have lower rates of interest.
One of the big attractions for bridging finance is that they tend to be very flexible financial products that can be arranged quickly for various reasons.
This then makes the loans attractive to others. For example, a business wanting to buy stock for a promotion or an individual looking to settle a tax bill or even a divorce settlement.
The amount a borrower can apply for will depend on the value of the security property that they are putting up for the loan.
Lenders will offer amounts ranging from several thousands of pounds to £1 million and the loans will range from one day and up to two years.
Bridging loan UK
For those who need to access substantial amounts of money quickly, a bridging loan UK may be the solution you are looking for.
Whereas a high street lender may take several months to come to a loan application decision, a bridging finance firm may offer a decision in principle within two days.
That’s a hugely attractive incentive for those who need to access substantial sums quickly and they may then have a formal offer made within two weeks and the entire process completed within four weeks.
For those who have borrowed previously from a particular bridging finance company, then this process can be completed even quicker.
We’ve already mentioned the flexibility of bridging finance but this is reflected in the interest rates being charged since the loans tend to be for a short-term.
The other flexible options for bridging loans include opting for monthly interest payments, so you pay this amount every month or you can have this interest deferred and then ‘rolled-up’ so it is all paid at the end of the loan’s term.
Bridging finance borrowers
Potential bridging finance borrowers also need to appreciate there will be a range of fees when they take out a loan – among these will be the valuation fee to pay the independent surveyor to value your security property.
There may also be a facility or arrangement fee as well as administration fees.
On top of this, there will need to be legal fees to pay the lender’s solicitor and legal costs but this is usually at a set rate.
Also, some bridging finance firms may charge an exit fee which could account for 1% of the loan should it be repaid early. However, not every lender will charge this fee.
There’s a lot to recommend UK bridging loans for short-term borrowing and if you would like more help and information about whether this type of finance is for you, then it’s time to speak with the experts at The Bridge Crowd.