Bridging Loans are a Short Term funding option typically used by investment property buyers to ‘Bridge’ the gap when buying a new property and waiting for a traditional Commercial Mortgage to be approved, or capital to be released from the sale of their current property.
Bridging Loans are most commonly used to help fund a new investment property purchase while you’re waiting for your existing property to sell. But Bridging Loans can also be used for a variety reasons such as major structural property improvements and renovation projects.
They are also often used to help those looking to buy at auction where you have a short timeframe to exchange contracts.
HOW DO BRIDGING LOANS WORK?
There are two types of bridging loan, closed and open. With a closed loan you are given a set repayment date – this type of bridging loan is traditionally used when contracts have been exchanged but you are waiting for the sale of your property to complete. With an open loan there’s no fixed repayment date but most lenders will expect the balance to be repaid in full within one year.
As with any loan, the lender will need evidence of a clear repayment strategy. This could be using equity from the sale of a property or evidence that you have a mortgage offer in place. You’ll also need to provide information regarding the new property you are purchasing and the price you are planning to pay for it – as well as proof of what you are doing to sell your current property (if relevant). As they are a stop-gap measure, bridging loans can be significantly more expensive than a ‘traditional’ loan or mortgage.
WHO ARE BRIDGING LOANS AIMED AT?
Bridging Loans can be beneficial in a number of circumstances but are generally speaking, aimed at experienced landlords and property developers, including those purchasing at auction. They can also be used for wealthy or asset-rich borrowers looking to release short term capital quickly without the necessity for traditional mortgage underwriting.
When taking out a Bridging Loan you could face much higher interest rates than with a traditional mortgage and, as the loans are short-term, rates are sometimes expressed as the rate per month. You will also note there will be exit fees which could be 1-2% of the loan amount, you may also have a Commitment Fee to pay on acceptance of 1% or more.
BRIDGING LOAN BROKERS
Varsity Finance are highly-experienced Bridging Loan Brokers. When you come to us for mortgage advice, you can take advantage of the following benefits:
Our team of Bridging Loan Specialists will work with you to provide a simple and fast Short-Term funding solution. We’ll aim to give you a decision in principle within 24 hours and in some cases, funds can be available within 24-48 hours.
To find out how we can help with your Bridging Loan, email us at help@varsityfinance.co.uk.
COMMERCIAL MORTGAGE BROKERS
Varsity Finance can source competitive rates from across the market. We have built relationships with specialist mortgage lenders who do not have a presence on the high street to secure finance where others cannot.
We can help arrange a Bridging Loan, a Short-Term Loan that provides fast access to funding, or Development Finance for the specific purpose of building new properties or making substantial changes to an existing property.
Interest rates and fees will vary depending on the client and security offered.
COMMERCIAL MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY