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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 0844 504 9414 for some invaluable professional loans advice.
July 16, 2008 at 7:05 pm | Bridging Finance | No comment
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