Bridging the finance gap
Bridge Loans Finance
What is a bridge loan?
A bridge loan is a short term mortgage secured on the property. It is typically used to bridge the gap between buying a new property and selling or refinancing the old one. A bridge loan allows purchasing the new property while you wait for the sale of the existing one.
How could a bridge loan help you?
A bridge loan can help you in several situations
- You are struggling to find a buyer for your existing property
- You lost the buyer for your property but don’t want to lose the property you want to purchase
- The property you want to purchase is through an auction, where there is a short completion date, usually 28 days and it would be difficult to secure a traditional mortgage
- The property is in a poor state and not suitable for mortgage security, it usually means no bathroom and/or kitchen. The property would need substantial work to be done to be habitable but is potentially a good investment
- You want to purchase land to build your own property
- You require funding for a short period without monthly payment
- You want to purchase a property but the seller needs to dispose of the property in a short time and there is no time to get the mortgage
How does a bridging loan works?
The open bridge loan has no fixed repayment date but is usually set for 12 months. You can repay the loan at any time up to the end date. You would also be able to extend it in certain situations.
The closed bridge loan will have a fixed repayment date. It would normally be available for purchases when you are almost complete on the sale.
How much does a bridge loan costs?
The cost of the loan will vary but it is more expensive than a standard mortgage. You might expect to pay between 0.5% to 1.5% per month.
You will need at least a 25% deposit to get the bridge loan. With the first-charge loan, you might be able to get more than with the second charge loan.
There are no monthly payments with the bridge loan and most likely you will get the amount requested reduced by the fees upfront. Another option is that the interest will roll up and you will get the full amount requested but you will have to pay back the total amount plus the interest.
It is important to have an exit strategy. Without one, you might not be accepted for the bridge loan. If you plan to sell the existing property, there will not be a need for income requirements and affordability calculations. If you plan to remortgage onto a new product, a full affordability assessment will take place.
How can we help you?
There are several options available for bridging loans and an expert specialist adviser can help you to choose the right product. We will compare the bridging loan to other possible finance options, and discuss the most suitable outcome.