Bridging Finance is a popular method to raise short-term finance, which is secured against an asset.
Generally bridging is used for auction purchases, releasing equity to invest, payment of HMRC bills, and property refurbishment & development, amongst others.
Bridging loans work as a means of financing or as they are called 'bridging' money from a lender.
For example you want to purchase a property which has vast potential. It requires works to be done to increase its value. Ideally you need the procurement of funds to be quick and flexible to allow you to purchase the property fast, the works to be done to add the value and the property to be either sold or refinanced at the higher value.
Bridging loans are secured (as is a mortgage) on an asset or multiple assets depending on the structure of the deal being presented.
Rates for bridging finance were very expensive and considered a last resort lending.
In recent times more lenders have entered the market and made it more competitive. This means rates can start form as low as 0.45% per month, circa 5.4% per annum.
Generally bridging rates are worked out a monthly basis as the loan facility is based on 6,12,18 or 24 month terms. This means you could borrow 'X' amount on day one and pay this back to the lender in month 6. This would mean you are paying 0.45% for 6 months only.
Bridging finance comes with standard fees you will find with most mortgage lending nowadays.
Expect to pay a broker fee. Our fees depend on the case complexity but generally sit around 1% of the amount borrowed. You will have to pay a lender fee, valuation fee, lenders legals fees and depending on your case possibly an exit fee.
The interest charged during the term of your bridging facility is either 1. rolled up and added to the amount you have borrowed or 2. charged upfront and deducted from your loan facility.
If you are considering Bridging, then we suggest you thing about the below points:
High Risk - Bridging is a high risk lending strategy.
Exit Route - You must know your exit route and our lenders will want to know what this is at the outset of the enquiry.
Fees - make sure you are comfortable with the fees involved with Bridging loans.
Cashflow - Before you apply to us, we would want to see your research, due diligence, comparable properties, factoring your interest roll-up, considering market changes and trends, understanding how it works and why it benefits you.
We would be more than happy to discuss this more detail. Fill in quick enquiry form and arrange a call with our specialist.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT
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