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What is a Bridging Loan?
A bridging loan is interim financing for an individual or business until permanent or the next stage of financing can be obtained. Money from the new financing is generally used to “take out” (i.e. to pay back) the bridge loan, as well as other capitalization needs.
Bridge loans are typically more expensive than conventional financing to compensate for the additional risk of the loan. Bridge loans typically have a higher interest rate, points and other costs that are amortized over a shorter period, and various fees and other “sweeteners” (such as equity participation by the lender in some loans). The lender also may require cross-collateralisation and a lower loan-to-value ratio. On the other hand they are typically arranged quickly with relatively little documentation.
January 20, 2010 at 1:17 pm | Bridging Finance | No comment
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Bridging Loans
If you’re having a home-selling nightmare, a bridging loan may be the answer but be very careful.
You have fallen in love with your ideal home, and your offer has been accepted. There is just one snag – you can’t get shot of your old house quickly enough and the deal is at risk of falling through. A bridging loan may be the only way to keep the deal on track.
But be careful before you dive in. These loans are expensive and are usually considered to be a last resort.
If a bridging loan can tide you over in the short term then the extra expense may save you from losing money already spent in the purchase process, as well as reducing stress, if you do it for the wrong reasons you may end up in serious financial difficulty.
For buyers with an imminent purchase but a problem with their own sale there are two options – taking on another mortgage or a bridging loan.
But beware, both will leave the borrower paying off two loans at once, and experts say bridging loans should not be used as a way of simply trying to beat property chain problems.
January 14, 2010 at 2:03 pm | Bridging Finance | No comment
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If it ticks all the boxes, watch out for the ‘Wow’ factor
Usually a bridging loan does not have anything to do with borrowing money to purchase a bridge. No, usually a bridging loan is what you desperately want when you’ve found a new home which is terrifically better than the terrific house you’re trying to offload, but can’t.
You can possibly see a pitfall just by reading the above. It’s the word ‘desperately’. When you’ve found the next ‘house of your dreams’ you want to grab it quick, make it yours, cut out the competitors etc.
In that frame of mind you’ll be ready to sign up for whatever deal helps you get it. But be careful before you dive in. These loans are expensive and are usually considered to be a last resort.
You will probably end up with a mortgage and a bridging loan and have to pay off both loans at once. Expert advice says you not use a bridging loan simply as a way of beating property chain problems.
However a bridging loan can tide you over in the short term and the extra expense may save you from losing money already spent in the purchase process, as well as reducing stress. But if you do it for the wrong reasons you may end up in financial difficulty which, when you look at the consequences, may elicit a rather large ‘Wow’.
January 17, 2009 at 6:35 pm | Bridging Finance | No comment
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Buy To Let Bridging Loans
If you’ve found a perfect buy to let property, but your buy to let mortgage has not come through quick enough or you’re waiting on the sale of an existing property to free up the cash, then a buy to let bridging loan could be the answer.
It’s a quick and painless kind of personal loan arrangement, designed to make ends meet on a short term basis until your imminent funds arrive, allowing you to pay back the loan amount.
August 8, 2008 at 5:02 pm | Bridging Finance | No comment
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Bridging Loan Warning
According to mortgagesorter.co.uk, the current financial climate makes it a bad time to use a bridging loan, as a mortgage loan will currently be harder to arrange in order to repay it.
This is good advice, and definitely worth taking note of. However, as with any type of personal loan, the message here is ‘look before you leap’. That may seem obvious, but many people still don’t consult a personal loan adviser before entering into loan agreements which later land them in trouble.
Take the time to talk to a loans professional, obligation free, before making any kind of loan arrangement – it takes only minutes and could save you from years of financial hardship. Call 08456 210 150 for some invaluable professional loans advice.
July 16, 2008 at 7:05 pm | Bridging Finance | No comment
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Bridging Loans in Action
The most commonly understood type of bridging loan is one that is taken to fund the purchase of a new property prior to the sale of an existing one – meaning that the temporary financial shortfall can be breached until the repayment funds are released.
But bridging loans can be used for quite a variety of other circumstances. For example, if a company sees a great opportunity to make a profit on a volume stock purchase, but is in financial difficulty, the company can arrange short-term bridging loan finance to fund the purchase of that stock. They can then repay the bridging loan once the stock has been sold and use the profit to get company finances back on track. It’s simple and it works.
July 3, 2008 at 11:18 am | Bridging Finance | No comment
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Why Bridging Loans Are Easy
Bridging Loans for short-term financial obligations are easy to arrange because the loan is backed by collateral, so the background checks required are less extensive than with other kinds of personal loan.
This can make the whole process of arranging a bridging loan surprisingly quick and easy.
June 22, 2008 at 2:16 pm | Bridging Finance | No comment
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Bridging Loans’s Diary
Oh my God! I ate one tiny piece of chocolate cake yesterday and I’ve put on about ten stone!! It’s not fair, Jennie from the commercial loans department eats about seven bags of crisps a day and still looks like a rake.
I need to be thin before my date on Friday. There just isn’t time! If only I could make some kind of deal to get the body I want instantly and then do the exercise afterwards to pay for it… a bit like a bridging loan for fatties!
June 15, 2008 at 2:35 pm | Bridging Finance | No comment
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What’s a Commercial Bridging Loan?
A commercial bridging loan is a simple, short-term kind of loan that enables you to borrow a lump sum of money in order to purchase land or property right away.
This is typically used in a scenario where you also have land or property to sell – repaying the short-term loan when the sale of your existing land or property is completed.
June 7, 2008 at 9:05 am | Bridging Finance | No comment
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Bridging Loans’s Diary
I saw some really nice shoes I wanted to buy today. Only thing was, I couldn’t afford to buy them until I’d sold the ones I bought last week. I was confident Sandra would buy them, but I hadn’t actually made the sale.
Luckily, I managed to arrange a sort of bridging loan with Trisha – she was kind enough to lend me the money to buy the new shoes until I could sell the old shoes and pay her back. Fantastic, I thought.
May 28, 2008 at 4:34 pm | Bridging Finance | No comment
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