What is a bridge loan?
In general, bridge loans are used for short-term financing of investment properties before selling existing ones. However, they can also be used for various business purposes, despite being commonly associated with this kind of use.
A bridging loan can come in handy when you are trying to buy a new investment property and sell an existing one simultaneously. This short-term financing solution is designed to help bridge the gap between two transactions. A bridge loan is typically used for 12 months and can be arranged relatively quickly with minimal credit checks.
Here are some tips on finding the best bridging loan for your needs.
Consider applying for a bridge loan
Among the many uses of bridging loans are purchasing new investment properties before selling existing ones, renovating existing investment properties, or adding an unmortgageable investment property to a portfolio. It is essential to know precisely what you need for the loan before applying for it.
Compare interest rates and fees
Generally, bridge loans are more expensive than other types of loans because they are short-term and have higher interest rates. However, it is still important to compare different options to obtain the best possible deal.
Plan your exit strategy
It would be best to have an exit strategy before taking out a bridging loan since it is a short-term solution. It may involve selling the existing investment property used to fund the bridge loan, re-mortgaging to a standard mortgage or bank loan, or selling other investment properties or assets. Be sure to consider all of your options and choose the one that makes the most sense for your situation.
Compare different lenders and shop around
Bridging loans are offered by many different lenders, so it is important to shop around and compare their offers before committing. You might want to consider a conventional mortgage or bank loan.
Consider a direct bridge loan lender rather than a broker
Finding a short-term bridging loan can be daunting due to the many providers now advertising. Furthermore, many of these lenders are brokers and not direct lenders. As ‘middle-men,’ they are not lending the funds but rather acting as an intermediary between you and the lender. Adding these additional steps will increase costs and lengthen the time to receive funds. By working with a direct lender, you will be able to save both on their commission and their processing fees.
If you require financial help but are unsure about the best bridging loan for your situation, you are not alone.
The first step is to fully understand what this kind of borrowing is, how it works, and the risks.
A loan bridges the gap between the purchase and sale.
Most bridge loans have a maximum term of 12 months, but they can be as short as six months.
Is it possible to make monthly payments on a bridging loan?
Some bridge lenders do not require monthly repayments; instead, interest payments are rolled up to fully repay the loan at the end of the agreed term.
How does a bridge loan calculator work?
Using a bridge loan calculator can help you estimate how much money you can borrow, how much interest you will have to pay back, and how long the loan period will last. The calculator should consider all of the properties you own and any mortgages or loans you may owe against them. By submitting this information, you will be able to use our online calculator to determine the possible loan amount.
Benefits of Bridge Loans:
The use of a bridge loan for property development
Bridge loans can also be used for non-property purposes:
Bridging loans: interest charges
Bridge loans usually have higher interest rates than regular loans because they have a short repayment period. Interest rates, however, will vary depending on the lender. Although the application process for investment properties is more extensive, the time saved by not having to apply individually may balance it out.
Benefits of Taking a Bridge Loan with a Direct Lender
Bridge loan borrowers should be aware of the benefits of working with a direct lender. Direct lenders offer borrowers several essential advantages, including:
Is Bridge Direct your first choice for a bridge loan?
Bridge Direct is a direct lender which provides instant loan decisions for all bridging loans. They have over 30 years of experience and will help you find the best loan for your needs.
You can call the Bridge Direct team on 020 3126 4969 or complete our contact form on the website, to get your free instant decision today!