If you’ve never heard of a bridging loan before, you might be wondering what it is and whether it’s suitable for you. Basically, bridging loans are great for short term funding. They are referred to as ‘bridging’ loans because they serve to bridge the gap between a debt due in property transactions and credit becoming available. In some cases, they can just be a short term loan. Want to know more about this kind of loan and whether it suits you? Read on:
If you have a plan to purchase property, a bridging loan can help you. In a situation where it wouldn’t have been possible, a bridging loan can make it so. They can be more expensive than a regular loan, however, which is why it should only be considered short term.
This type of loan is designed so that you can complete the purchase of a property before you sell your current home. You get short term access to cash, except there is a high rate of interest involved.
Although this loan helps movers when there is a wait between the sale and completion dates of property buying, it isn’t limited to this use. The loan can also help somebody who wants to sell fast after renovating their home. It can also help somebody who is purchasing a home at an auction. Bridging lenders have become very popular these days, as banks are becoming more strict due to the financial crisis. However, not all of these lenders are bridging experts.
If you choose to take out a bridging loan, you could pay 18% on it in a year. That’s 1.5% in a month.
Who Are Bridging Loans For?
Usually, this kind of loan is targeted towards landlords and amateur property developers, and also people buying at auctions where a mortgage is needed fast.
You can take out a bridging loan for a number of causes, whether you’re getting involved in property investment, buy to let, or development. Taking out a bridging loan because banks are becoming more strict is very common nowadays.
Although bridging loans can be very helpful, you need to think about it carefully first. This includes an exit strategy. The only issue is that you might not be accepted with a major lender after you’ve taken out the loan. This puts you under a slight risk of losing your home.
Bridging loans shouldn’t be considered as an alternative to mainstream lending too early on, as you need to consider your options carefully. You need to be aware that you’ll be paying a lot of cash on top of your loan, including legal fees and admin fees. Make sure you know all about these before agreeing to anything.
Getting a bridging loan from an FSA regulated place is always recommended. These companies come in all different shapes and sizes, so you need to make sure that they are trustworthy and suited to you. If a bridging loan sounds like it would suit you and your situation, then go ahead and apply!