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Residential Bridging Loans
Ask most renters, and they’ll tell you that they’d love to have the freedom of owning a property – which is why many investors and homebuyers are seeking out alternatives to traditional mortgaging.
Residential bridging loans are ideal if you want to purchase a property but don’t necessarily have the finances to take that step.
What is a Residential Bridging Loan?
You can use a residential bridging loan in place of a mortgage, enabling you to speed along the process.
Why Take Out a Residential Bridging Loan?
Raising money for a property purchase
Whether you’ll buy a property for residential uses or plan to rent it out, you’ll need a certain amount of cash flow to acquire it in the first place. This proves difficult for many people – especially if you’re applying for a mortgage too.
The money can take ages to come through, but a bridging loan is a quick solution if you need urgent funds.
Completing renovations on a property
Most people consider taking on a personal loan to refurbish their property, but these loans are often unsecured. They can result in hefty interest fees and hold little benefit.
Bridging loans come with the option to essentially roll up your interest, so when you decide to either sell the property or find a new financing option, you’ll be able to pay the amount back without worrying about excess payments.
Buying a property at auction
Visiting an auction means you have to be able to secure a property by outbidding other buyers. Having a bridging loan allows you to have cash at your disposal, making it easier to buy a home.
Waiting for your sale to go through
In an ideal world, you’d find a property you like and sell yours immediately after – but as we said previously – the housing market is volatile. Securing a bridge loan means you can make an offer on the property of your dreams and wait a bit longer to sell yours.
Paying off debts
It’s pretty rare for people to use bridge loans to pay off their debts, but some do. It depends on your circumstances and amount of debt, so it’s always best to check your eligibility if you’re using the loan to relieve debt.
Who Can Get a Bridging Loan?
Anyone can get a bridge loan, and there are no set criteria to define what makes a suitable candidate. Some providers will offer bridging loans to people with bad credit, but your circumstances will be the deciding factor.
Most importantly, the feasibility of your exit strategy is the most significant factor in a lenders decision.
What’s an exit strategy?
An exit strategy is how you’ll pay back the monies received. For example, you could buy a property at auction, refurbish it and use the profits from the resale to pay back the bridging loan.
Other exit strategies include moving onto a long-term financing solution and paying back the money through inheritance funds.
How Much Does a Bridge Loan Cost?
The interest rates depend on your agreement with the lender, and you should consider the arrangement fee.
Lenders need security and will be more likely to offer a bridging loan if your current property has development potential or a strong prospective valuation.
It’s also important to mention that your property may be repossessed if you cannot stick to your end of the bargain.
The Types of Bridging Loans
First Charge Bridging Loan
First charge loans are ideal if you have no fixed finance agreement on your current property. So, in most cases, you’ll only receive this loan if you don’t have debt on your property or are in the early years of a mortgage.
The most common issue is mortgage providers, which might penalize you for refinancing your property so early.
Second Charge Bridging Loan
A second charge loan enables you to acquire bridging finance regardless of whether you have debt on your property. This solution is ideal if you want to avoid the penalties associated with early mortgages.
Are Bridging Loans a Good Idea?
As a registered England and Wales company providing a first charge loan and second bridging options, we’re confident that you’ll agree our finance options are designed to suit your needs.
How to Secure a Bridging Loan Through Loan X
Our company is registered in England and Wales, and we’re also authorised and regulated by the Financial Conduct Authority.
Whether you’re looking for a first charge bridge loan or second charge loan, our friendly team can advise you on our financial services and monthly repayment options.
Contact us at our registered office today.