When should I consider a bridging loan?
As far as short term funding options are concerned, bridging loans can be an excellent option. Surprisingly though, not everyone knows or understands that much about them. Here, the first4commercial team discuss bridging loans; what they are, and when they should be considered.
Essentially, bridging loans are used to help complete the buying of a new property before the funds are in place from the property being sold. There is often a gap between the sale and completion dates when you are part of a chain. Although the rates can be high, as much as 18% per year, they are usually far cheaper than the alternatives.
Typically, this type of finance is aimed at landlords and property developers, as well as residential buyers. It should be considered when you don’t have time to speak to a traditional lender because you really do need the funding straight away. It is important always to have an exit strategy that allows you to pay off the loan as soon as possible. This is usually in the form of equity that becomes released when your other property has been sold.
Lenders will usually ask to see proof of your exit strategy before agreeing to the loan, and you need to be honest about the source and amount of money that is coming your way. Your exit strategy can also be in the form of a mainstream mortgage later on down the line.
It is always advisable to speak to an FCA regulated lender when considering a bridging loan. Contact us at first4commercial today for more information.