In these times of high interest rates, a bridging loan is a good option
Mike Collins Mortgage Expert and independent financial advisor, explains what Bridging Loans are and how they could be used in current times
Bridging loans offer interest-only loans. They are typically taken out for people who need funds quickly. It is basically a bridge that allows for credit to become available between incoming debt and existing credit.
If you are in need of a quick-term lifeline, it can help you purchase property directly or at auction, complete renovations, and do any other work that is needed.
Mike Collins Mortgage expert, an experienced financial planner, shared his 17-year experience. Homebuyers are losing two out of five property purchases due mortgage delays. It is crucial that they can move quickly – and they have the option to do that using a bridging loan.
“The simple answer to this question is that a loan bridging a gap is paid back in a short time, which allows the interest to be more easily managed and makes the loan more affordable. Below are some details about bridging lenders and the reasons they can be helpful in this current economic climate.
Rates for Bridging Loan Interest
These can be fixed. Stability can be achieved if you can pay the agreed-upon repayments. Variable interest rates will change in accordance to the Bank of England Base Rate, which currently stands at 2.25% (Sept.2022).
The rate you pay will determine the amount of your monthly repayments.
Rates can vary depending upon what you want to use the loan for. Bridging loans on land or business bridging loan rates are generally more expensive than one for residential purchases.
Buyer demand for homes is very high. This increases the demand for bridging loans and delays in the purchasing process.
It is important that you realize that interest rates are charged on a monthly schedule when looking at them. This is because terms usually last only 9-12months.
Cash available quickly
Bridging loans, which are easier to arrange than secured or mortgage-type loans, are more efficient if time is of the essence.
Funds can often be released in just three days. Bridging loans are a great alternative to the competition.
It is quicker to arrange because the lending decision tends depend on your exit strategies. The strategy you have for paying the loan back at the end of the term.
If you have bad credit, it is possible to get one
Your credit score is an important factor in determining whether you are eligible for a loan. It can also affect the rate of interest or other fees you may have to pay.
Even if you have bad credit, it’s possible to get one. The lenders will tend to be more concerned with the property than your credit score when determining the rate.
There are no long checks because the loan is secured against assets of value.
Help to fix broken chains
Recent research found that 1/5 applicants needed a Bridging Loan because they were part a chain that was broken. This delayed their purchasing timeline and made it necessary to get a short-term loan to cover the gap.
Bridging loans could be a way to still make a sale. Currently, the average completion time takes four months.
The current rise in interest rates may lead to a fall in buyer demand. Bridging loans could also be affected by this drop. But loans like this could be lifelines to many buyers, property owners, and others.
Whatever bridging lender you choose make sure they’re a member the Financial Conduct Authority. This means that any complaints, especially when it concerns large sums of cash, can be handled according to FCA guidelines.