Property owners can use bridge loans to purchase a new investment property before selling their existing one.
In cases where you need fast funding and own other properties, bridge loans are typically the best option. There can be risks associated with these types of financing plans, such as high interest rates and the risk of using the property as collateral.
Bridge loans: how do they work?
As with any property purchase, investing in a new property can be challenging. Ideally, we would sell our current property just before purchasing the new one with the proceeds. Rarely does this happen. Chains can break down, sales can fail, and funding can fall through. Bridge loans can be useful in these situations.
Bridge loans are ideal for bridging the gap between two purchases. Bridge loans can be used to purchase investment properties and have repayment terms of six to twelve months.
An example of how the procedure might work is as follows:
Bridge loans can be obtained from direct lenders or brokers.
After the bridge loan is approved and funds are received, you can use the proceeds to fund the down payment.
Work on the new investment property can begin as soon as the purchase has been completed.
At the end of the loan term, the existing property will be sold and the proceeds used to repay the bridging loan.
Bridge loans are typically available for 70% of the property’s value. Unless your current investment property has at least 30% equity, you may not be able to obtain enough proceeds from a bridge loan. When determining whether you are eligible for a loan and how much you will have to repay, an online bridge calculator is essential.
When choosing a bridge lender, you should consider the value of your investment property. A bridge loan is not available if your property does not have at least 30% equity and it has not been paid off. Bridge lenders also look at the creditworthiness of the borrower. Be aware, Bridge lenders may charge a higher interest rate because of the risk involved.
The most important aspect of this type of financing is that the amount you are borrowing must be covered by sufficient assets or funds.
The difference between brokers and direct lenders
The number of bridging loan companies in the UK is steadily growing as more people use this type of gap loan to get funded. However, direct lenders are rare among these companies.
Loans are arranged by brokers through known funding sources.
As a result, brokers usually charge for their services, which is extremely expensive and adds a lot of unnecessary costs to the process.
With a direct lender, you are able to communicate directly with the person who is lending you money. By speaking directly with the lender, you will be able to save a lot of money and speed up the loan process.
As direct lenders, Bridge Direct has direct access to funds, unlike brokers. Business owners in London, Manchester, and throughout the UK can borrow short-term bridging loans from Bridge Direct. With its extensive financial skills, it can secure financing for all types of situations, including mortgages and commercial loans.
If you’ve had trouble getting approval from a traditional lender due to bad credit, don’t worry. You may be able to get a bridging loan from Bridge Direct no matter what your situation is.
At www.bridge-direct.com, you can fill out the “Get an Instant Quote” form to receive an instant decision from the decision maker. Bridge Direct may have a bridge loan solution for you!
You can also reach a decision maker by calling 020 3126 4969.