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What
is a Bridging Loan?
How
they work
How
to get one
What
they Cost
Where
to get a bridging loan
Apply
from here
What is a Bridging Loan?
This
is a loan that is usually taken out to solve a temporary
cash shortfall that may arise when buying a
property or business, or perhaps paying for a renovation.
A
typical example of when you may need
one would be if you want to buy a second property before
you've sold your first.
Or
you may need one if you're buying
property at auction
As
they are more risky for the lender than the usual housebuyer's
loan, bridging loans are more expensive and should
only be used where you are fairly certain to repay them
within about 6 months.
Depending
on the lender, a Bridging Loan can be obtained by the
self employed or people with bad credit. In other words
to those who traditionally have found it more difficult
to get loans and mortgages.
Bridging
Loan contents
How they work
In
the case of buying property, a Bridging Loan is normally
secured by getting a mortgage on the new property, and
taking out a second mortgage on the property
being sold.
In
this case the loan will depend on a positive valuation
of the relevant properties.
Lenders
will usually allow Bridging Loans of up to 65%
of the value of the properties - less any existing mortgage.
But this will depend on the lender so you can shop
around for better deals.
You
can usually borrow between £25,000 to £500,000
as standard.
Larger
loans are possible but may take slightly longer to arrange.
Bridging
Loan contents
The
process of getting a Bridging
Loan
Here's
how our partners operate (ie the lenders we will connect
you to if you apply from
here
Your
application is emailed direct to our partners.
They
will respond to you within an hour (on a normal working
day ie between 9 am to 5.30 pm Monday to Friday) with
an offer in principle.
If
you agree to their offer in principle, the lender will
arrange for an urgent valuation
of the property the loan is to be secured against.
Once
they have recieved your payment for this valuation it
will take a maximum of 72 hours.
The
cost of the valuation will vary but an average would be
£200. To speed up payment you would be able to deposit
the funds in a High St bank.
Meanwhile
you need to get your solicitor or conveyancer to move
very quickly on all the usual conveyancing
tasks ie the local authority search, checking the deeds
of the new property and so on.
(You
can read more about this in the conveyancing
section where there's also information on a very efficient
conveyancing service).
You
should expect the entire process to take 7 to
10 days - ie from your first application to the
money being paid over to you.
It
could be done quicker. It depends on
how fast you want to move and if there aren't any significant
hiccups.
Bridging
Loan contents
The
Cost
You
will normally be charged a set interest rate, which is
usually referred to in terms of a percentage per month.
For
example; say you borrow £100,000 at 1.5%
per month, the loan will cost you £1,500 per month
(ie 1.5% of £100,000 for each month).
In
theory you want to shop around for the best rate.
But in practice most people simply use the lender that
can act quickest because time is usually of the essence
when a this type of loan is required.
Please
note: If you've got a bad credit history you can expect
to pay more.
Bridging
Loan contents
Bridging Loans for Auctions
If
you buy a property at auction, either for your own occupation
or as an investment you
have to complete within 28 days.
You
could use a specialist bridging lender, whose main business
is to cater for auction purchases.
These
lenders are normally "non-status" (ie they make
no enquiries of the financial standing of the borrower),
and have no minimum periods or redemption penalties.
Bridging
Loan contents
Where to get a bridging
loan
You
may be able to obtain one from a normal bank, or alternatively,
from a specialist bridging lender.
The
latter may well be preferable. Unlike most banks, they're
geared to deal very quickly with your request -
which is probably fairly urgent.
They
can normally come up with the money within a few days
of your application. The average would be a week or so
- depending on how speedy the conveyancing
has been done by your solicitor or
conveyancing agent.
However
it could all be done in only be a couple of days.
If you need a Bridging Loan now
we can put you in contact with a specialist who we've
found produces the best deal in the fastest time.
Apply
now
Bridging
Loan contents
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Sorter contents
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