Bridging Loan Advice
Bridging loans get their name because they bridge a gap in your cash flow. While this could normally be covered by a credit facility such as an overdraft or a credit card, bridging loans are designed for relatively large amounts that you will only need to borrow on a one-off basis.
Common uses of Bridging Loans
By far the most common use of a bridging loan is when moving house. The complexity of housing chains means you may need to pay for a new house before receiving the cash from the sale of the old one. In extreme cases, such as relocating for work, you may not yet have found a buyer. Bridging loans could also be used when you are buying a house to renovate and sell quickly, meaning a lengthy mortgage isn't worthwhile. In rarer cases, bridging loans can be used for other purposes such as on commercial property acquisition or equipment, or even for vehicles.
In most of these circumstances, neither an ordinary unsecured loan or a mortgage is viable. Lenders aren't willing to take the risk of offering potentially hundreds of thousands of pounds without something as security. On the other hand, traditional mortgages don't make financial sense for the lender as the low rates mean they won't see an adequate return on their investment.
Things you should be aware of
A bridging loan tends to carry a higher rate of interest than an ordinary mortgage, although of course you'll be paying this rate over a far shorter period, meaning they can be an extremely cost effective way of raising finance. It's important to note that bridging loan interest is normally calculated on a monthly basis rather than annually: don't be afraid to ask for a breakdown of exactly what you'll pay, as a professional lender will always be happy to provide these details. It is also advisable to see if any set-up/administration charges can be added to the loan so you can repay them at the end of your term.
There are two main types of bridging loan. A closed bridge is used when you've already made a deal to get the money that you'll use for the repayment (for example, you've exchanged contracts on your old house) and are simply awaiting payment. An open bridge is used when you haven't yet agreed such a sale. Lenders are stricter about open bridges, so you'll often need to show there's a credible likelihood of selling the property without problems, that you've got a back-up plan, and that you've got the cash to make the bridging loan interest payments .
One thing that's worth remembering is that bridging loans are much more flexible than ordinary mortgages. With a traditional home loan, there's not much variation: there's a good chance you'll be paying a 20% to 35% deposit, paying back over 25 years, and signing up to a fixed percentage rate for the first few years. With a bridging finance, there's much more scope for variations in the rates, the length of the loan, the repayment terms, and the options if you need to use the loan for longer than expected.
How Positive Finance can help
Positive finance bridging loans are highly flexible, tailored to your individual requirements irrespective of the purpose of the loan or how long you need it for.
But to ensure we offer the best possible bridging loan for your needs, we encourage you to seek free advice from our expert team before you go ahead.
We're not one of those impersonal online services where you never get to speak to a real person. Instead, our fully-trained specialists are always on hand to offer friendly, expert advice over the phone, just call 0161 728 4333.
As one of the UK's most respected bridging finance specialists, we make it our business to provide you with the best bridging loan on the best terms with highly competitive rates. The result is that we believe you won't find a better, faster or more flexible deal anywhere.
Positive finance is regulated under the Office of Fair Trading and the Data Protection Act. Also, we're a direct lender, meaning that you will get a quick and hassle-free response to your application, and you won't have to worry about wasting money on broker fees.