Bridging loans are an excellent solution used to bridge a gap in finances. For example, you may wish to raise funds quickly to purchase a new property or business. They can often be completed within a matter of days. We can help you find a longer-term solution to repay the Bridging Loan in due course.
With Friends Capital, you can borrow up to £10million to secure your purchase. Bridging loans are a reliable, short term tool when you know that alternative finance will soon be available to repay the Bridging Loan. Get in touch today to find out how much you could borrow, and how quickly our lenders could get it to you.
A bridging loan is a short-term loan typically something homeowners use to complete on a new house if their current one is not selling. It gives you access to the money as a short-term loan, usually with a high rate of interest. You might want this type of short-term financing if you are buying property at an auction. Paying for renovations before resale or acquiring land for development are also times that bridging loans may be an option.
If you have found a new house without selling your current one, you may not get a second mortgage. A bridging loan can cover you, so you get the new home you want. It does mean you will own two properties during that time, both with secured debt on them.
At times there can be several homeowners in a chain looking to purchase their new homes. If a buyer pulls out, a bridging loan can close the loop, so the sales go ahead. As a short-term financing option, a bridging loan is a useful tool. It is ideal if you can secure another financing option to pay it off further down the line.
When you start looking into bridging loans, you will notice some terms and phrases that describe the different types. Examples of bridging loans include:
You can apply for a bridge loan that is either a closed or open-bridge loan. The type you choose will depend on whether you know a date for paying it back. If there is a specific date that you will repay the finance, you will have a closed-bridge loan. So if you have a buyer for your house with a completion date, this will allow you to buy the new house before that date.
Open-bridge loans are an option if you don’t know exactly when you will be paying it off. It is a useful option if you are buying a new house before having a buyer for your current one. You can use the loan to make sure you don’t miss out on the home you want. If you are considering renovating your house before putting it on the market, an open-bridge loan will give you the money you need.
When you get a bridging loan, it will be either a first charge or a second charge loan. These terms refer to who is the priority for repayment in the case of a defaulted loan. If you have financing to buy a new house with a mortgage on an existing home, that is a first charge loan on your old house. The mortgage will be the priority for repayment if the house is repossessed.
Or you can use the bridging loan to clear the old mortgage making it a first-charge loan. If your new house is the security on the bridging loan, you have a first-charge bridging loan. The paperwork relating to the financing will show you what type of bridging loan you are getting. It will also show which property, or properties, are security for the loan. Any security for the loan is at risk if repayments are not met.
A bridging loan is a specialist type of financing. The major banks, specialist lenders, and mortgage brokers can provide these types of loans. As this is a finance option tailored for a specific need, you will need the right lender.
Bridging loans are typically faster to get than a mortgage. After you apply, you will have a decision with a couple of days. Even though this type of loan is quicker, it still requires a thorough credit check. An initial decision will be quick, but further checks may have to happen. It can involve looking at the value of your property and any mortgages and other commitments you have.
The amount you can borrow will be subject to any credit check results. Any amount will be dependent on the property you are using as security. If you have multiple properties, you may be able to borrow more than if you have a single one.
At Friends Capital, we offer bridging loans up to £10million to help you secure the property you want. After completion of relevant sales, we can help with long-term solutions to resolve the bridging loan.
As these types of loans typically carry a higher rate of interest, they generally are a short-term solution. You can opt for this type of financing if you need to receive the money quickly. Many people choose this type of loan to make sure they don’t miss out on a property or investment.
Other loans may be a more suitable choice depending on your situation. Development loans or personal loans could be the right option in specific circumstances. Our financial experts can help find the right type of loan for your needs.
You will be aware of fixed and variable rates from any mortgage deals you have. Bridging loans are also available with fixed or variable rates. A fixed-rate will keep the same interest rate for the whole finance term. A variable-rate bridging loan can go up or down. The change in interest rate will make your payments change, so you may not pay the same amount each time.
Your loan provider sets a variable rate that your loan is based on. It is typically linked to the Bank of England’s base rate. You may see an effect on your loan when the rate shifts. So it is best to keep an eye on the rate to account for payment changes.
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