Bridging loans are an increasingly popular form of alternative finance and here we explain how using a bridging loan calculator will help you find a great deal.
Most of the websites for bridging loan lenders will have a calculator available to help potential clients decide whether this type of finance is for them and, more importantly, see clearly how much their loan will cost.
For those who may not be aware, bridging finance has grown in popularity because the loans are easier to access than a traditional loan from a high street lender.
Since the financial crash, most mainstream lenders have tightened their lending criteria but bridging lenders have different criteria and will loan on a security, usually a property.
Alongside this growth in lenders, the number of bridging finance products available in the marketplace has also risen rapidly.
Essentially, this is a type of short-term finance and they were used traditionally for bridging the gap between someone buying a property and the sale of their current property.
Short term bridging loans UK
Nowadays, short term bridging loans UK can be used for just about any reason, including raising capital before a property sale, paying an urgent tax bill or refurbishing business premises.
One of the important issues when using a bridging loan calculator is that the potential borrower will see how even a small fluctuation in interest rates will affect the monthly payments.
And since the amount that someone can borrow will depend on the security they offer, it is possible with some lenders to offer more than one security to access a larger loan.
This may be of interest to landlords with a portfolio where their equity may be spread over several properties for them to generate the equity for the loan they require.
Usually, bridging finance will be for up to 12 months, though lenders are available offering 24 months.
Use bridging loans UK for purchasing at auctions
In addition to buying property, you can use bridging loans UK for purchasing at auctions whether its commercial or residential property, expanding a business or even debt consolidation.
The bridging loan calculator will also highlight what the minimum loan amount is for that particular lender and also their maximum. These figures will range from several thousands of pounds to several millions of pounds.
The minimum term for most lenders will be one month, though it is possible to access bridging finance for as little as one day.
The bridging loan calculator is generally used as a reference tool and the actual interest rates may vary depending on the loan amount and the security being offered.
The calculator will have a number of fields for you to fill in, including the type of bridging finance you require and the length of the loan, how many security properties you have and their valuation.
You also need to bear in mind that an independent surveyor will be engaged, and you will have to pay for the service, to value the properties being put up.
Then you’ll need to complete the amount of loan that you require, the potential broker fee and there may be a lender’s fee – this is an administration charge and will vary between lenders from 0% to 2%. Some lenders also have an assessment fee.
Bridging loan lenders will have a calculator
Since most bridging loan lenders will have a calculator on their website, usually with similar fields to complete, it makes comparing the offers between lenders a tad easier and you will also understand where the charges are being made and whether there’s a fee for early completion.
Not every lender will have an exit fee but some will do.
As mentioned previously, bridging loans tend to be geared towards short-term borrowing which is why they are slightly more expensive than traditional finance.
However, they also have a quicker application process which could see money being transferred within a week or two. And if you have a previous relationship with the lender, then it could be done in a few hours or days. That compares with high street lenders who may take weeks or months to complete their loan application process.
Potential bridging loan borrowers also need to appreciate that the better rates tend to be for a ‘closed’ bridging loan application, which means that the person borrowing knows when they will have the finance in place to repay the loan.
The slightly more expensive rates are for those loans known as ‘open’ loans where the borrower may not be sure when they can repay.
If you would like more help and information about using a bridging loan calculator to find a great finance deal, then you need to speak with the team at The Bridge Crowd.