If you are considering applying for a bridging loan, you should first know all the facts about the bridging loan industry. In this article, we have compiled a quick guide to help you become familiarised with bridging finance.
Bridging loans are better known as short term loans with usually 1 to 12 months repayment terms. These types of loans are secured against a property or business premise as first or second charge. A first charge bridging loan is usually offered at a higher LTV than a second charge due to lower risks. Bridging loans are more flexible than High Street Loans, which means the lender will be more sympathetic to individual circumstances.
The borrowed funds are often 100% of the purchase price of the property or about 70% of the building's value. The asset in question may be residential, commercial, or even land.
As long as there is enough equity in the security, the loan's interest and all the other fees are settled at the end of the loan term. The APR levels for bridging loans pose a potential risk for the lender and the LTV against the property. The higher the LTV, the greater the interest rate will be.
Some high street banks as well as private lending companies may arrange bridging loans, but you can also apply through a specialist Bridging Loan Broker. Banks tend not to not offer Bridging Loans, any that do are have strict criteria for this type of lending and tend to have an inflexible approach. Even though it will be much quicker to obtain a bridging loan through private lenders, most are not openly accessible to borrowers so you may have to apply through brokers.
1. Buying property or land at auction where completion is set within 28 days.
2. Purchasing a property undervalue where the vendor wants a quick sale.
3. Difficulty in raising cash.
4. Completing a property purchase without having sold the existing premise.
7. Needing funds for divorce settlements.
8. Acquiring cash for legal matters.
• You will need to pay for the valuation report on the building. The fee is determined by the property's value so the higher its price, the greater the valuation charge will be. Commercial surveys are typically more expensive than residential surveys.
• You will need to cover your own legal fees in addition to the lenders legal charges.
• A set-up charge is required by the broker to arrange the loan and this can be somewhere between 1 and 2% of the amount borrowed. However, this fee cannot exceed the maximum LTV that the lender has agreed on. Some lenders also impose early redemption charges in case you wish to redeem early. The early redemption penalty typically starts at 1 month's interest.
• Some lenders also apply a minimum term for the loan which can be as short as one day to 3 months. This is not an issue for borrowers with loans of up to 3 months or more.
Most of the mentioned fees can be cut down or reduced with the assistance of an experienced and professional bridging loan broker, contact Sunrise Commercial Finance and speak to one of our brokers now on 0800 009 6459.