Bridging loans are a short-term funding option, they are used to ‘bridge’ a gap between a debt coming due or until either longer-term finance can be arranged or the property is sold in order to repay the loan, they can also simply act as a short-term loan in pressing circumstances.
It is important to remember that bridge loans are a short term finance method, so should not be taken out for long periods.
Unlike other secured loans and mortgages, a bridging loan can be set up quickly and can be secured against property that would normally be considered unsuitable security for many lenders.
The borrower has a set date when the loan will be repaid, for example, the borrower has already exchanged to sell a property and the completion date has been fixed. The sale of that property will repay the bridging loan.
The borrower sets out a proposed exit plan to repay their loan but there is no definitive date at the outset, there will be a clear cut-off point.
A bridging loan is a short term loan that can be used by businesses or individuals for any purpose until permanent funding, or their next stage of financing becomes available, or they sell a property to repay the debt.
As a short term method of finance they have advantages over other funding methods because:
- Can make use of property that is in a poor state of repair and therefore unsuitable security for most lenders
- Developing or refurbishing a property
- Chain break – a property sale has fallen through and you still wish to continue purchasing another property
- Non-simultaneous purchase – securing a property purchase until your existing property is sold
- Purchasing properties at auction
- No monthly payments – interest charges & set up costs can be added into the bridge loan for the full term and paid when the loan is redeemed
- Income proof and affordability calculations are not a limiting factor if interest is added to the facility
- A poor credit history is ignored by many bridging lenders
- Less age restrictions
- Purchasing properties at auction
- Lease extensions
- Many facilities do not have exit or redemption fees
There are many lenders offering bridging finance, making rates extremely competitive, bridging lenders can come in all shapes and sizes, ranging from one-man bands to professional outfits regulated by the Financial Conduct Authority (FCA) – such an array of choice can be confusing – Roxburgh’s team of advisors are here to help.
To discuss your bridging and mortgage requirements in more depth please contact Roxburgh Financial Management by phone on 0345 434 9505, or email firstname.lastname@example.org or use the contact me option by clicking here
There will be a fee for bridging advice, a fee of up to 1% of the loan amount may be charged depending on individual circumstances. Our typical fee is £895, of which £395 is payable on application with the remaining £500 to be paid on completion of the loan. A bridging loan is a loan secured against your property, your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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