What is the meaning of Bridging Finance?
Bridging finance is a short-term finance solution that helps bridge the gap between two financial purchases.
- If you are selling your home to buy a new one, you may need a bridging loan to help cover the costs of the new home until the sale of the old home is complete.
- You may require bridging finance when purchasing at auction as typical auctions require a payment deposit of 10% on the day of the auction and the remaining balance to be paid within 30 days which doesn’t leave buyers with enough time to secure a standard mortgage.
- If you are a property developer and have development sites, bridging finance helps you to finance resolutions for unexpected issues that may arise, preventing any delays in the turnaround of the project.
The Different Types of Bridging Loans
When considering taking out finance to purchase a property it’s important to understand all options available to you. A bridging loan has a few different types of finance available, including:
- secured bridging finance: This type of bridging loan requires you to provide security against the loan, such as a property. The interest rates are usually lower than for unsecured bridging finance.
- asset-based bridging finance: This type of bridging loan is based on the value of your assets, rather than your credit score. It is a good option if you have bad credit or you’re self-employed.
- development sites
- auction purchases
The terms of bridging loans can vary, but they are typically paid by monthly payments between 1 and 12 months. The amount you can borrow will depend on the value of your security and your lending criteria.
Is a Bridging Loan right for me?
Cap Ex Finance understands the UK lending providers, our aim is to offer you the best lending products from the market. If you require a bridging loan, commercial mortgage or development finance, Cap Ex Finance is here to help you find the best option.
Bridging loans can be a good option if you need to raise money quickly for a short-term financial need.
When you take out a bridging loan, you agree to a term with the lender, usually 12 months. The intention is to pay back the loan as quickly as possible. Often, you are able to repay the loan early because you have sold the property or have come into funds from another source. With bridging loans, there are no early repayment charges, so you just pay the loan off. The interest you are charged is only for the actual days that you had the loan, and it is calculated on a daily basis. Most lenders have a 3 month minimum interest period but generally, most bridging loans go over this length of time due to legal processes.
If you’re thinking of taking out a bridging loan, it’s important to compare different lenders to find the best deal for your needs. Make sure you understand the terms and conditions before you sign any contracts.
Alternatives to Bridging Loans?
There are many alternatives to consider when thinking about financing an investment, while you may believe that a bridging loan. It’s important to have considered all other options available such as auction finance, commercial mortgages, and property development finance.
Frequently asked Questions
- What loan rate can I expect?
The interest rates that you will receive on bridging loans, will depend entirely upon which type of finance you choose to take out. The typical interest rates that you can expect are 0.39% – 1% per month.
- Are there other fees to consider?
On top of considering the interest rate of your finance solution, you also need to give consideration to the loan application fee, valuation or arrangement fees. These are similar to the costs you would expect from a mortgage broker on a regular property purchase.
- Can I use a Bridge loan to purchase at a Property Auction?
Yes, bridge loans are a type of finance that can be used to fund auction purchases. To discuss your specific requirements for funding, we recommend getting in touch so that we can tailor our advice to your personal circumstances. All loans and finance options we offer will be discussed with confidentiality.
Are you considering taking out a Bridge Loan or Development Finance? Contact us today to talk to our Finance experts today to see how Cap Ex Finance can help you.