The biggest setback for anyone looking to move home is when you have found your dream property that fits within your budget. It is to all intents and purposes the perfect property. However, there is just one problem – you have yet to sell your current home and you can feel your dream property begin to slip through your fingers.
A bridging loan in effect turns you into a cash buyer ready to make an offer and move, helping you get the house you want, before your current one has even sold.
What exactly is a bridging loan then?
In essence a bridging loan is ‘short-term finance’. A financial solution that bridges the gap between purchase and sale between two properties until such time as the long term finance (i.e. selling your house) becomes available. Hence the name – Bridging.
Why would I use it?
Traditionally only the domain of property developers, bridging loans have become known as being notriously expensive, and in many cases very high risk. Ultimately, the last resort.
However, in recent years their reputation has taken a turn for the better and they are now commonly viewed as just another mainstream borrowing option, with a number of specialist lenders and brokers available to access much more competitive rates, as well as more flexible terms.
Bridging finance particularly comes into it’s own in the increasingly fast property market, when many potential buyers may be looking at the same property – turning someone from a locked chain situation into more or less a cash buyer. When a property is being sold at auction, there are very few potential buyers with a complete finance solution at hand, there and then. Again, bridging finance can give you the upper hand in this situation.
Why is bridging finance a more expensive option than traditional mortgages?
Bridging finance at One 77 (in addition to many other brokers) is generally available from sums of £50k upwards, and dependent on available assets to secure against, can go up to tens of millions of pounds. Because bridging loans are secured against existing assets they are therefore not appropriate, or generally available, for first-time buyers.
Though there are some set up fees applicable such as valuation costs and solicitor’s fees, unlike the majority of brokers we do not charge a broker fee.
How quickly can I get access to my funds?
Because we have access to an array of specialist lenders who we have close relationships with, we can often find a solution on the same day, once we have all the necessary information to hand. If the complexity of your case is fairly straightforward then funds can become available within a matter of days, as opposed to the traditional weeks associated with conventional mortgages.
I have the money, I have purchased my new property… now what?
Whenever you take out bridging finance, there will be an ‘exit’ from the loan. Basically, how you will pay it back. Upon taking out the loan, a lender will need to know how you will be doing this.
There are two routes to exiting your bridging loan:
Closed Bridge – this is when your property has a defined completion date, but you need to act fast to secure the purchase of your new one.
Open Bridge – this is a more flexible solution and allows for more ambiguous timescales, such as when a property is under renovation. The repayment time is then set over a specified period to fall into.
As with all loans though, the sooner you pay it off the more you save on monthly interest fees.
For anyone requiring a ‘bridge’, your own situation will be completely unique to you. At One 77, our Specialist Lending Team are experienced in all forms of bridging finance solutions for even the most complex of cases. To speak to one of the team please call us on 01249 474956 or use the contact form below to book a time when is good to call you.