How to Get a Bridge Loan – the Fastest Way to Get the Funds You Need
What is a bridge loan?
A bridge loan is a short-term loan used to finance the purchase of a new investment property before the sale of the existing investment property is completed. Bridge loans are typically used when there is a delay in selling the old property, such as when the existing property is being sold in a down market.
How does a bridge loan work?
A bridge loan is a short-term loan used to finance the purchase of a new investment property before the sale of the old one is completed. The bridge loan is typically paid off with the proceeds from the sale of the old house at the end of the agreed terms, meaning you don’t have to worry about making regular monthly repayments and can repay in full once the sale completes.
How to get a bridge loan to buy a new investment property
A bridge loan is a short-term loan used to finance the purchase of an investment property. The loan is typically used by buyers who have been approved for a mortgage but have not yet closed on the property. The bridge loan allows the buyer to complete the purchase and take possession of it while processing the mortgage. The mortgage is typically completed at the end of the bridge loan term, and the bridge loan is paid off in full.
There are many businesses out there providing Bridge loan services. A quick Google for ‘bridge loans’ will return hundreds of results, all offering a similar service. It is important to consider that many of these will be brokers, and not direct lenders.
Brokers as the name suggests, are middle men who will ‘broker the deal’ between themselves and the lender supplying the funds for the deal. By involving a broker, you are more likely to;
- Increase funding lead times
- Increased fees or associated costs due to broker charges.
How to repay a bridge loan
The loan is typically for a period of 6 to 12 months, however some lenders may offer the option to extend the loan term and create a new deal as required.
Once the old investment property is sold, the bridge loan is repaid with the proceeds from the sale along with any fees and interest.
Are Bridge Loans A Good Idea?
Bridge loans are a good idea if you are trying to buy a new investment property before selling an existing one. However, they can be applied to a wide range of business applications, all of which are useful under the right circumstances.
Bridge loans are divided into two types:
- Closed bridging loans
- Open bridging loans
Closed bridging loans
A closed bridging loan is a short-term loan used to finance the purchase of an investment property before the sale of an existing property has been completed. The loan is typically used to cover the difference between the purchase price of the new property and the sale price of the old property. Closed bridging loans are typically used when there is a delay in the sale of the old property, such as when the property is being marketed for sale but has not yet been sold.
Open bridging loans
A bridge loan is a loan that does not have a fixed repayment date. This type of loan is preferred by borrowers who are uncertain about when their expected finance will be available. Due to the uncertainty on loan repayment, lenders charge a higher interest rate for this type of bridging loan.
What are first and second-charge bridging loans?
A first charge bridging loan is a loan taken out against the property being sold. A second charge bridging loan is a loan taken out against the property being purchased.
How much can you borrow with a bridging loan?
The amount you can borrow with a bridging loan depends on several factors, including the lender’s requirements, the value of the new and old investment properties and your credit score.
Most lenders will allow you to borrow up to 70% of the value of the new property.
The easiest way to assess what you can borrow is to speak to the lender or use a bridging calculator.
Am I eligible for a bridging loan?
As long as you hold enough equity in an existing investment property or tangible asset, then you may be eligible to take out a bridging loan.
Where can I get a Bridge loan in the UK region?
There are many places where you can get bridge loans in the UK. One of the most popular places is a Bridge Direct. Bridge Direct have over 30 years of experience in the mortgage and bridging market, they are direct lenders, and not brokers meaning they have direct access to funding.
As they are direct lenders, this is why they can offer their free instant decision on all applications, bad or adverse credit is considered, and you can be assured when you speak to Bridge Direct you are in contact with a decision maker, as no middle men are involved.