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
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
People often turn to bridging loans as the quickest way to get the cash they need. It only takes a few days for the funds to be released. Here is a list of reasons that people require bridging loans:
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.
5. Avoiding home repossession.
6. Settling tax debts.
7. Needing funds for divorce settlements.
8. Acquiring cash for legal matters.
The interest and expenses of arranging a bridging loan are higher than most other loans and may include one or all of the following:
• You will need to pay for the valuation report on the building. The fee is determined by the property’s value
• You will need to cover your own legal fees in addition to the
• 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.