Bridging loans are a type of short-term loans. These loans can be used to buy a second property to get time to sell the existing property, even if you have a mortgage. Essentially, it acts as a ‘bridge’, which allows property owners to cover the gap between selling and buying. You have to consider several aspects of this type of loan before you commit to it, such as the interest rate and conditions.
Since fast bridging loans are short term, it doesn’t take very long to get the loan approved. One of the most significant benefits of bridging loans is that they are quickly available for funding property-related projects. If you have a good credit history, then getting quick response on your loan application is possible. But, if your case is complicated, then you can expect a delay of a few days or in some cases a few weeks. Nonetheless, bridging finance is still fast compared to traditional loan options.
Getting bridging loans quickly
The bridging finance lenders tend to take pride in their quick services of providing a loan, and some might turn out to be speedier or faster than others. It should be kept in notice that the loan providers might reject your application on the basis of eligibility criteria. While it may seem like the right thing to do but approaching multiple loan providers is not a good idea. It can have a negative impact on your credit score.
If you want to get a bridging loan quickly, then you need to start by making an enquiry with different providers. This way, you can know which lender can offer you the best deal based on your circumstances and needs. You will not only save time but also this can prevent any black marks on your credit profile.
Bridging finance application process
Bridging finance is quick to arrange than mortgages as the lending decision depends on the exit strategy. If your plan for repaying the loan by the end of the agreed term is clearly evidenced, then the lender takes care of the significant underwriting.
The steps involved in the fast bridging loan process:
● You make an enquiry to a bridging loan provider. A consultant gets back to you to understand your needs and exit strategy.
● After the consultation, you get a response usually within hours with a loan offer including a quote, the interest rate, fees and all the terms and conditions.
● If you are satisfied with the offer and accept it, the lender will do the legal work. Typically, the loan is secured against a property.
● After the legal work is done, you will get your funds.
Pros and Cons of bridging loans
Bridging loans benefits
● The convenience: one of the major attractions of these loans is that they are quicker than the traditional options. With these loans, you can purchase a property right away without having to wait for your existing property to sell.
● Say no to renting: if you attain a bridging loan you won’t need to rent out your property in the period between selling the existing property and settling into a new one.
● Repayments: depending on the structure of your loan, you might only have to pay your current mortgage during the bridging period.
Bridging loans drawbacks
● Loan cost: bridging loans may require two property valuations, which would amount to two valuation fees, and separate charges for the new loan.
● The interest rate: usually interest is charged monthly, so if it takes longer to sell your property, your new loan will have higher interest.
● Risk of not selling: if your the property doesn’t sell within the time frame of your loan, then you will be left with a huge interest bill, and you could risk losing your property.
● Risk of not selling the property at high enough price: if your property sells for a lower cost than expected then you will be left with a significant ongoing loan amount, this may put you in a difficult position financially. So you should have a back-up plan.
● The termination fees: if your the current home loan provider does not offer bridging finance, then you will have to switch providers, which means you will have to pay an early exit fee.
If you are looking to move to a new home and are waiting for your existing to sell than a bridging loan is perfect for such circumstances.
