Main Features of a Bridging Loan

Main Features of a Bridging Loan

When looking to buy property or land, most people will look at a high street lender such as a building society or bank to arrange a mortgage for the purchase. When speed is important to the successful completion of the deal, a Bridging Loan can provide a fast solution to allow you to act quickly and purchase the home you want.

Bridging Loans can be secured against residential and commercial property, as well as building plots or even land without planning permission.

A Bridging Loan has a number of features that can make it a very useful method of financing in specific circumstances. Here is a few key points that make a Bridging Loan a good choice for you.

  • 1

    Option to Defer Interest Payments.

    By taking the option to add interest payments to the loan rather than having to make regular, usually monthly, repayments it frees up your cash flow. If you are buying a property to renovate then you can devote all your cash to the cost of the renovation without worrying about finding the monthly repayments as well. If you are using the Bridging Loan to purchase a property while you wait to sell an existing property then you take away possibility of having to pay two mortgages at the same time. When your property is sold then the Bridging Loan plus the interest accrued is paid in full from the sale.

  • 2

    Bridging Loans Can Be Arranged Quickly

    A regular mortgage can take a few months to complete from application to completion. Bridging Loans are so much quicker. As any Bridging Finance is primarily underwritten on the basis of the properties value, rather than all your personal financial circumstances, lenders can make decisions very quickly. It is common for Bridging Loans to take less than a week to complete and three or four days is not unusual. It makes them perfect for property purchases that need to be made quickly such as property sold through an auction.

  • 3

    Bridging Loans are Short Term Financial Arrangements

    Mortgages are most often quoted as being 25 years, although they can be much lower than that and even 30 years or more. A maximum term for a regulated Bridging Loan used for the purchase of a residential property is 12 months, although in certain circumstances extensions can be arranged.

    In reality a Bridging Loan is typically a lot shorter than 12 months as its purpose is to provide a temporary financing solution between buying a property quickly and either selling it on again or arranging a more permanent method of finance.

  • 4

    High Loan to Value Deals can be Achieved

    As well as being arranged quickly, quite high levels of finance can be arranged through a Bridging Loan. Some lenders will go as high as 80% of the property value depending on the actual situation.

    One of the most beneficial ways to arrange a bridging loan so that the maximum loan value can be achieved is to secure the Bridging Loan against both the property being purchased and an existing property.

  • 5

    Bridging Loans have no early Repayment Fees

    Unlike conventional mortgages which frequently charge early repayment penalties, Bridging Loans do not.

    This is because Bridging Loans are designed for short term projects with the minimum term usually just one month. Most lenders only charge interest on the actual time the Bridging Loan is in place. This means that if you take out a Bridging Loan for 12 months but repay it in full within five and a half months, then you will only pay interest on the exact number of days the loan was outstanding.

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