Key Takeaways
- Comparing bridging loans can be challenging without professional help, as lenders’ rates and terms are not readily available on comparison sites.
- Working with a whole-of-market broker, such as Bridging Finance, allows you to access tailored advice and the best deals across multiple lenders (our services are free of charge, too).
- Fees, interest rates, and terms vary significantly between lenders, making professional guidance crucial to avoid costly mistakes.
Why Compare Bridging Loans?
Not all bridging loans are created equal. Interest rates, fees, and terms can vary widely between lenders. However, it’s difficult to compare rates and terms on your own:
- Lack of Transparency: Most bridging loans are not listed on traditional comparison sites, making it difficult to assess all available options.
- Complex Terms: Understanding the nuances of loan terms, including fees, repayment structures, and early repayment policies, can be challenging.
- Limited Access: Some lenders only work through brokers and simply do not accept direct applications.
Benefits of Using a Broker
By partnering with a whole-of-market broker like Bridging Finance, you gain access to the entire lending landscape. Brokers can:
- Provide expert advice tailored to your circumstances.
- Compare rates and terms from multiple lenders.
- Simplify the application process and handle complex paperwork.
- Ensure you secure the best possible deal for your needs.
Plus, at Bridging Finance we’re free of charge, so you’re not losing out on money you could be putting towards your new home.
How Does It Work?
The bridging loan process typically involves the following steps:
- Initial Research: Explore whether bridging finance suits your needs. This includes understanding costs, eligibility criteria, and exit strategies.
- Eligibility Assessment: Use a bridging finance calculator to estimate costs and check your eligibility.
- Broker Consultation: Speak with a broker to refine your plans and receive expert guidance.
- Compare the market: We go away and compare the best bridging loans available in the market for your circumstances. There will often be a clear winner in terms of costs, but if it’s close we’ll present you with a range of options and talk you through them.
- Pre-Approval: Secure a decision in principle, usually within 24-48 hours, to strengthen your buying position.
- Application Submission: With your broker’s help, submit a formal application to the lender.
- Valuation: The lender arranges a property valuation to finalise the loan-to-value ratio.
- Funds Release: Upon approval, funds can be released within days, enabling you to complete your purchase.
- Repayment: Repay the loan using your exit strategy, whether through property sales, refinancing, or other means.
Your broker will manage communication with the lender, solicitor, and surveyor, ensuring a smooth and efficient process.
Key Factors to Consider When Comparing Bridging Loans
Loan-to-Value (LTV) Ratio
Lenders assess your eligibility and rates primarily based on the LTV ratio. This is the loan amount divided by the value of the secured property/properties. Most lenders cap LTV at 75-80%.
- Higher LTV: Typically comes with higher interest rates.
- Lower LTV: Results in more favourable terms and rates.
Interest Rates
Bridging loan interest rates are charged monthly, usually between 0.6% and 1.5%. While this may seem high, the short-term nature of these loans makes the overall cost manageable for many borrowers.
- Monthly Interest: Stops accruing once the loan is repaid.
- Rolled-Up Interest: Added to the loan amount, so no monthly payments are required during the term.
Fees
Bridging loans come with additional costs, such as:
- Facility Fee: Typically 1-2% of the loan amount.
- Valuation Fees: Average around £950 but vary based on property value.
- Legal Fees: Cover both your and the lender’s solicitor fees.
- Exit Fees: Some lenders charge a fee for early repayment, though this is avoidable with careful lender selection.
- Broker Fees: At Bridging Finance, we’re fee-free, saving you up to £995.
Exit Strategy
Your exit strategy is how you plan to repay the loan, whether through property sales, refinancing, or other means. Lenders require a clear and viable strategy before approving your application.
Example Scenarios for Bridging Loans
Buying Before Selling
You’ve found your dream home but haven’t yet sold your current property. A bridging loan enables you to secure the purchase, making you an attractive buyer. Once your current property sells, you repay the loan in full.
Auction Purchases
Auction properties require quick completion, often within 28 days. Bridging finance provides the necessary funds to meet these tight deadlines, giving you the flexibility to finalise your purchase without delay.
Renovation Projects
Unmortgageable properties, such as those without a kitchen or bathroom, can be purchased with bridging loans. After completing renovations, you can refinance onto a standard mortgage or sell the property for a profit.
Property Investment
Investors often use bridging loans for “bridge-to-let” or “fix-and-flip” projects. These loans allow you to acquire, refurbish, and refinance or sell properties, maximising your return on investment.
Why Choose Bridging Finance?
At Bridging Finance, we specialise in simplifying the bridging loan process and securing the best deals for our clients. Here’s why we stand out:
- Whole-of-Market Access: We compare rates and terms across the entire market, ensuring you get the best deal.
- Fee-Free Service: Unlike many brokers, we don’t charge you for our advice.
- Expert Guidance: Our experienced team handles every detail, from initial consultation to fund release.
- Tailored Solutions: We work with a wide range of lenders to find the perfect loan for your circumstances.
- Quick Turnaround: Our streamlined process ensures fast approvals and fund releases.
FAQs
Is a bridging loan worth it?
Bridging loans can be invaluable for quick property purchases or unlocking opportunities unavailable through traditional financing. However, the costs should be carefully weighed against the benefits.
How quickly can I get a bridging loan?
Some loans can be arranged in as little as 72 hours, though the average process takes 3-6 weeks.
Do I need a salary to get a bridging loan?
No. Eligibility is based on your exit strategy and secured assets, not your income.
Are bridging loans safe?
Yes, provided you have a clear exit strategy and work with a reputable broker to ensure you’re getting the right loan for your needs.
Ready to explore your bridging finance options? Contact Bridging Finance today to discuss your needs and get a tailored quote. With our expert guidance, you’ll navigate the bridging loan process with confidence and ease.