Bridging Loans and Bridging Finance are simply secured loans used to bridge the difference between a deposit and the sum of money you would have otherwise covered with existing cash reserves or a mortgage that hasn’t quite cleared yet on a short-term basis. Bridging Loans are commonly used by purchasers of Auction Property, Land Acquisitions (most lenders would require planning to have been granted on the Land) or purchasing a Buy-to Let Property. Though Bridging Loans are generally seen as a convenient alternative to conventional forms of borrowing, a few key points need to be kept in mind –
1) It is expensive – from arrangement fees to monthly interest payments, bridging loans tend to be far more expensive than conventional mortgages from high street lenders.
2) Complicated – The conveyancing transaction surrounding a Bridging Loan from your initial instruction to successfully bringing it to completioncan beand is very complicated. It is therefore crucialto instruct a competent and experienced Conveyancing Solicitor from the start.
3) Understanding how the Lender will deal with the Interest Payments – Unlike conventional mortgages, Lenders (depending on their exposure) will either offer rolled upor retained interest(we will briefly describe the difference between the two below)
Are you looking for a Bridging Loan or Lender who can act with speed at competitive Interest rates? Contact our New Business Team on 0203 375 2187 today to discuss how our Partner Bridging Lenders can assist you NOW.
How much can I usually borrow with a bridging loan?
How much you can borrow as always depends on the purpose of the Bridging Loan, the type of security you can give the Lender and the duration of the loan. Most Purchasers use a Bridging Loan facility to buy and complete on a transaction prior to selling their existing Property or their investments. Typically, the Loan to Value variesbetween 60% of the value of the Property on Commercial Properties to 75% in some instances on Residential Property acquisitions.
Bridging loans are aimed at Clients who require access to funds quickly but at a premium interest rate ranging from 0.9% a month to 3%. Since speed is of the essence, at Express Conveyancing, we can source you a Bridging Loan Lender fit for your requirements and also appoint an experienced and specialist Bridging Loan Conveyancer at an affordable price. You will also be required to cover the Lender’s legal costs and survey fees (this is not uncommon even when you are obtaining a conventional mortgage however the costs are more expensive).
It is also worth noting, as we have briefly touched earlier on this article, that theLender’soffer willeither offer to/give the option to eitherretain or roll up the interest. If the Lender retains interest, then a basic example isas follows –
Borrowing – £100,000
Term 12 months
Monthly Interest – 1.25%
Total Interest over the 12 months – 1.25% x 12 x £100,000 = £15,000
Arrangement Fees plus costs – circa £5,000
Therefore, the NET Loan you will receive will be circa £80,000
If the Lender allows you to pay the Interest on a rolled up basis, your NET Loan amount will be £95,000 however at the end of the term, you will be required to pay back £95,000 + £15,000 + exit costs.
Most Lenders operate a ‘Retained Interest’ Policy to minimise their exposure.
Express Conveyancing are a specialist Conveyancing Panel Management Company and Bridging Loan broker dealing with hundreds of similar transactions a month. As our name suggests, all our systems, people and infrastructure are geared to ensuring your transaction completes as quickly as possible. If you have a requirement for Bridging Finance or a Conveyancer to deal with a Bridging Loan facility, contact our New Business Team today on 0203 375 2187 or using the Contact Us form.
