A Bridge Loan – The fastest way to get the funds you need
The bridge loan is a short-term loan used to finance the purchase of a new investment property before the sale of an existing property is completed. Bridge loans are typically used when the sale of an existing property is delayed, such as when the property is being sold during a period of low demand, possibly stuck in a chain of sale.
A bridge loan: how does it 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 has been completed. The bridge loan is usually repaid with proceeds from the sale of the old property at the end of the agreed-upon terms, meaning you won’t have to make regular monthly payments and can repay in full once the sale is completed.
Getting 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. A bridge loan allows the buyer to complete the purchase and take possession of the property while the mortgage is being processed. At the end of the bridge loan term, the mortgage is completed, and the bridge loan is paid off in full.
Bridge loan services are offered by many companies. Performing a quick search on Google for bridge loans results in hundreds of results, all of which offer a similar service. It is important to remember that many of these will be brokers rather than direct lenders.
A broker, as the name implies, acts as a middleman between a property purchaser and the lender supplying the funds for the purchase. By engaging a broker, you are more likely to;
- Increase funding lead times.
- An increase in fees or expenses due to broker commissions.
The best way to repay a bridge loan
Typically, loans are granted 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 necessary.
The bridge loan is repaid with the proceeds from the sale of the old investment property along with any fees and interest.
Bridge loans: Are they a good idea?
You should consider a bridge loan if you plan on purchasing a new investment property before selling your existing one. Nevertheless, they can be applied to a wide range of business applications, all of which can be useful when used appropriately.
A bridge loan can be classified into two types:
- Closed bridging loans
- Open bridging loans
Closed bridging loans
A closed bridge loan is a short-term loan used to finance the purchase of an investment property before the sale of an existing property is complete. Typically, the loan is used to cover the difference between the purchase price of the new property and the sale price of the old one. Typically, closed bridging loans are used when there is a delay in the sale of an existing property, such as when a home is being marketed for sale but hasn’t yet sold.
Open bridging loans
Bridge loans do not have a fixed repayment date. Those who are uncertain about when they will be able to obtain financing prefer this type of loan. Lenders charge a higher interest rate for this type of bridging loan due to the uncertainty of repayment.
First- and second-charge bridging loans are what?
A first charge bridging loan is a loan secured by the property being sold. Borrowers take out second charge bridging loans against the property they intend to purchase.
How much can you borrow with a bridge loan?
The amount you can borrow depends on several factors, including the requirements of the lender and the value of the old and new investment properties.
You will typically be able to borrow up to 70% of the property’s value from most lenders.
An easy way to determine how much you can borrow is to speak with the lender or use a bridging calculator.
What are the requirements for a bridging loan?
If you own an investment property or tangible asset with enough equity, you may be eligible for a bridging loan.
Where can I get a bridge loan in the UK?
In the United Kingdom, there are many places where you can obtain bridge loans. Bridge Direct is one of the most popular sources. The Bridge Direct team has over 30 years of experience in the mortgage and bridging market. They are direct lenders rather than brokers, which means they have direct access to funding.
Since they are direct lenders, they can offer a free instant decision on all applications. You can be assured that Bridge Direct does not use middle men, so even if you have bad credit, it will be considered.