Do you need funds quickly? It might be a good idea to consider bridge loans

Before the sale of an existing property is completed, a bridge loan is used to finance the purchase of a new investment property. A bridge loan can be used when the current property cannot be sold due to low demand or being stuck in a chain.

Bridge loans: how do they work?

An investment property can be purchased with a bridge loan before the old one is sold. When the old property is sold at the end of the agreed-upon term, the bridge loan can be repaid in full, so regular payments won’t be necessary.

Bridge loan for the purchase of an investment property

A bridge loan is a short-term loan used to finance investment properties. Borrowers with buy-to-let mortgages are typically approved but haven’t closed on the sale of their properties. While the mortgage is being processed, the buyer can complete the purchase with a bridge loan. Repayment of the bridge loan is completed when the mortgage is repaid.

There are many companies that offer bridge loans. Bridge loans are one of the most popular searches on Google. It is important to remember that many of these lenders are brokers rather than direct lenders.

The role of a broker is to act as an intermediary between a property buyer and a lender who provides funding. By hiring a broker, you are more likely to

  • Increase funding lead times.
  • Broker commissions increase fees or expenses.

Repaying a bridge loan in the most effective way

Typically, loans are granted for six to twelve months. It is possible, however, for lenders to extend the loan term and work out an additional deal if necessary.

In addition to any fees and interest, the old investment property is sold to repay the loan.

Are bridge loans a good idea?

If you plan on buying an investment property before selling your old one, a bridge loan may be an appropriate option. Bridge loans can be useful for a variety of business purposes, depending on your situation.

Bridge loans can be classified into two types:

  • Closed bridge loans
  • Open bridge loans

Closed bridge loans

The purpose of closed bridge loans is to finance the purchase of an investment property prior to the sale of an existing property. In this case, the loan is used to cover the difference between the sale price of the old property and the purchase price of the new one. The closed bridge loan is used when an existing property has not yet sold, such as when an investment property is being marketed.

 Open bridging loans

As bridge loans have no fixed repayment date, they are attractive to borrowers uncertain about when they will be able to obtain financing. Bridging loans carry a higher interest rate than conventional loans due to repayment uncertainty.

What are first- and second-charge bridge loans?

A first-charge loan is secured by the property being sold. In order to purchase a property, the borrower takes out a second-charge loan.

How much can you borrow with a bridge loan?

You can borrow based on your previous and upcoming investments as well as the lender’s requirements.

  • Most lenders allow you to borrow up to 70% of the property’s value.
  • Use a bridging calculator or speak with the lender to determine how much you can borrow.

What are the requirements for a bridge loan?

Borrowers with investment properties or tangible assets with sufficient equity may qualify for bridging loans.

In the UK, where can I get a bridge loan?

There are many places in the United Kingdom that offer bridge loans. Bridge Direct is one of the most popular. We have over 35 years of experience in mortgages and bridging. Their access to funding is direct because they are direct lenders rather than brokers.

A direct lender, Bridge Direct offers free instant approval on all applications. Bridge Direct will consider your application even if you have bad credit.

Contact Bridge Direct

You can contact bridge direct in many ways, you can contact us directly using the contact details below;

 020 3126 4969

Alternatively, fill in the contact form below and one of our decision makers will contact you shortly to help you.