Finance Blog | Commercial Lending, Essex, London | first 4 Commercial

How are Commercial Mortgage Rates in the UK at the Moment?

There are currently two types of commercial mortgage rates in the UK – fixed and variable. The rates are generally higher than a residential property, namely due to the higher risk a lender faces when providing a mortgage to a business. Deposits are therefore much higher, ranging from 15% to 30%, with lower deposits usually being deemed a higher risk and coming with increased interest rates.

Fixes rates for commercial mortgages remain the same for the entire duration of the loan or for a fixed period, after which they revert to a variable rate. For a variable rate, the amount changes depending on the current base rate from the Bank of England, while other commercial mortgages are also influenced by the base rates.

The base rate in 2018 is 0.5%, with the Bank of England recently deciding to hold the same interest rate to help stimulate growth. This is good news for anyone with a commercial mortgage, as expected changes tend to create a lot of unrest, scaring away many investors due to increases in market prices.


Open Bridging Vs Closed Bridging Finance

Like any other kind of finance today, bridging loans are often more complex than they might appear on the tin. For example, did you know that you get two different forms of bridging loan; open, and closed?

A closed bridging finance deal is one where the lenders knows exactly what will be paid back, and when. It’s known to them how you will manage the payments, and it will make it much more likely for you to get the loan if you can provide the ample needed proof. They are usually more specific and secured, and thus come with the benefit of lower interest rates for being able to prove that you fit in with their criteria.

It’s less risk to the borrower, and thus is a very popular option for those who can provide the needed information

An open bridging loan, though, is very much different. Open bridging is available for those without a clear exit strategy. You don’t need to know exactly the path you will take to pay it off; you need only secure a date of repayment.

Most of the time, this will be seen as a higher risk option for the lender and thus they may choose not to give you the investment. That’s usually also tied in with the fact that you would be expected to pay the loan back at a quicker period of time than beforehand or risk paying large fees for missing your payment date.


Bridging Loans with Bad Credit Scores

Like any other form of loan, the chances of your success when it comes to securing a loan comes down to your credit score. Someone with a bad credit score, naturally, might struggle to get the kind of finance that they would have been hoping for.

Therefore, those with poor to mediocre credit scores often avoid even attempting to go for something like a bridging loan. You can, though, get a bridging loan even with a poor credit rating; there is no set-in-stone pathway to decide if you are eligible to receive a bridging loan or not. Often, it’s decided on a case-by-case basis, which should make it easier for you to be successful in your application.

The first thing that you need to do is speak with an expert financial advisor. They can take a look at the strength of your credit, and help determine if you are likely to be seen as a successful candidate or not. For example, you might be in good present financial health but have a chequered history.

If you could show the lender that you have a legitimate exit strategy that allows you to pay the loan off with ease, then bridging loans can be secured even with poor credit. It’s all about making up for the deficit in trust that a poor credit history creates by being able to show where you will make up that shortfall.

With expert assistance, this isn’t as challenging as it sounds.


Can Landlords Receive Bridging Loans?

In this modern era of financial short-termism, it’s not uncommon for a landlord to need a cash flow gap fulfilled. While many options exist to fill that hole in the books, one of the best and most proven solutions around at present is that of a bridging loan.

Bridging loans are very popular, offering you all the help that you need to make the right call on your financial shortfall. They usually allow you to pick up a small-to-medium sized loan to cover an investment or a realistic cash flow issue.

A landlord might find use for a bridging loan if they need help:

  • Making up the cash needed to add a new property to your portfolio.
  • Refurbishment and property upgrades to improve portfolio value.
  • A fast-acting solution that can help you to meet your debts and pay off costs.

They often provide landlords with an easy way to secure short-term finance with the promise of repayment. So long as you can provide an exit plan – a provable range of solutions that shows off how and when you will pay back – you can often secure low interest rates to make your bridging loans more affordable to receive.

Either way, you might find that a bridging loan will solve the problem that you face. With buy-to-let mortgages no longer as prevalent as they once were, it’s important that you can seek out alternative forms of investment. With bridging loans, you can find the perfect solution to do just that.


Is Bridging Finance My Last Resort?

For some reason, the concept of a bridging loan – a short-term loan to cover a cash flow issue that can be corrected shortly – has become increasingly confusing. Many people imagine, for example, that a bridging loan is the last resort, the kind of finance that you only go for when nothing else is available.

To say that is true, though, would be a massive disservice to what has become a very popular means of financial security. They are actually very smart solutions which can help you out of a tough spot momentarily. Market challenges can strike us in all manner of different ways, and one of the most common issues that you might find is short-term cash problems.

With a bridging finance loan, you can cover that shortfall with relative ease. It allows you to get a much more reliable means of securing the cash that you need immediately. It has become a very popular means of loan for good reason; it covers a more favourable loan period. It’s viewed on its own merits each time, too, rather than trying to make you fit into a very specific loans structure.

For that reason, it should often be a first port of call when you need a specific sum and want to avoid borrowing an excess of cash, or you wish to avoid paying the loan over a long period of time.

Either way, you’ll find that bridging finance is far from a last resort.


Tips for a successful loan application

When you’re applying for a loan, it’s important that you try to get your application right the first time around, especially if you need the money for something time sensitive. In this post, we’ve complied a few tips to help you achieve a successful loan application.

  • Ensure you give the correct information. The smallest of mistakes can negatively affect your application, and even get it rejected. Check spellings, your street address, and the accuracy of all the information you’ve provided.
  • Check your credit report before you apply. You can use a wealth of various credit checking sites to see what your current score and report is. Do this before you apply for a loan to avoid wasting both your time, and the financial lender’s time.
  • Build your credit history. If you’ve never had a loan or a credit card, it’s difficult for a financial lender to figure out how good you are at managing money and repaying what you owe. This could stop them from lending to you.
  • Don’t apply if you’re currently paying back another loan. This is a cycle of debt, and the financial lender will be wary about lending to you while you’re still paying off other loan debt.
  • Understand how the loan works. You won’t get assistance by asking nicely, but by proving that you understand the policy of the company, and how paying the loan back works.

Using these tips, you should be well on your way to creating an excellent loan application.


How to get the best commercial loan

If you’re looking for a commercial loan, chances are you’ve just started looking into business loans that you’re eligible for. When searching for a commercial loan, you’ll find that the results you get back from the internet are extensive, to say the least. Below, you’ll find a step-by-step guide to help you figure out how to get the best commercial loan.

1. Think about why you need a commercial loan

Commercial loans can be used for a range of business needs but are mostly used to fund business ventures or cover business costs that occur in the operation of your business. Determining why you need the commercial loan will help you find the best one for you.

2. Look at the loans available

Like all loans, commercial loans come in all shapes and sizes. Research into the ones available; how much you can borrow, interest rates, and if there are any limitations on what they can be used for.

3. Find out what you can qualify for

Depending on various factors, you may not be eligible for all available loans. Read up on those that have peaked your interest and check the criteria with the financial lender.

4. Gather your information

Once you’ve enquired and found a loan you’re eligible for, have a look at the loan application and start putting together all of the required information you need to supply.

5. Apply

Fill in your application, check it for mistakes, and click submit. Finally, wait for a response from the lender.


Bridging loans and moving home

There are two main bridging loan types: the closed bridging loan, and the open bridging loan. Closed bridging loans are typically used by individuals buying homes that have already exchanged on the sale of their existing property. Open bridging loans, however, are usually taken out by buyers who have found their ideal property but might not want to put their current home on the market yet.

If you have the option to use a bridging loan, you may be able to tide yourself over in the short term of any unforeseen expenses that could come from the purchase process. For example, for homeowners whose buyer is delaying the purchase, or if it seems like a deal might fall through. For buyers, if there’s an issue with the sale, you have the option of a second mortgage or a bridging loan.

Unless you are certain when a home sale will be confirmed, you should avoid taking on debt like a second mortgage. This is where a bridging loan comes in. The financial provider will want to see the details of the mortgage you’ve taken out for the new property you’re purchasing, as well as proof that your current home is on the market at present. They’ll also want to know how you expect to meet the repayments, and what your exit strategy is if the sale of your home falls through.

Bear in mind that bridging loans have higher interest rates than a lot of other loan types. Consider talking to the other party and your solicitor about your concerns before you take out a loan.


Repaying a bridging loan

Bridging loans usually have higher interest rates than most other loans available from financial lenders, so you should be cautious about taking one out. However, if a bridging loan is definitely the way you need to go, you should have a strategy in place for when you need to start making your repayments.

Before your loan application is approved, you’ll need to prove that you’ll be able to meet the repayments with the interest attached to them. Unless you have agreed otherwise with financial provider, bridging loans typically last no more than 18 months, though some providers will only allow up to 12 months.

Some loans are structured so that the interest is paid each month, whereas others include the interest as part of the full loan repayment. Interest rates typically start from 1.5% a month, or 18% APR. Though some providers do offer rates as low as 1% per month.

Whether you have a closed bridging loan or an open bridging loan, there is nothing stopping you from repaying the loan earlier than the original repayment date. A closed bridging loan requires the borrower to show that they can raise the funds to repay the loan by the repayment date, whereas, an open bridging loan requires the borrower to pay their loan back on or before the repayment date. For an open bridging loan, it’s suggested that the borrower repays as quickly as possible to avoid some of the interest that is added on as time goes on.


What to look for in a financial lender

Taking out a loan is a particular kind of stressful, but with this short guide, you should be well on your way to finding a great financial lender for your loan needs.

Look for a financial lender that can offer you options. Not just options for repaying your loan, but also different loan types and various interest rates. When you’re deciding on a loan, you should be able to thoroughly look at all of this information to make an informed choice.

Ask for credentials, associations, and registration numbers. Official financial lenders have to be registered with the Financial Conduct Authority and should have a visible FCA number on their website. For example, first4commercial are also full members of the National Association of Commercial Finance Brokers and are associates with the Association of Bridging Professionals. Our FCA number can be found at the bottom of our website.

Watch out for hidden charges. Loan companies should be upfront about everything that you loan package includes, especially if there are any additional charges to their service. Some lenders have been known to include faster payment charges that they haven’t disclosed to the individual requesting the loan.

Finally, check the financial lender’s reviews. Past customers will have a lot to say about a service, whether it was good or bad. Checking reviews can save you a huge headache in the future, and their great for first-hand experiences from individuals who have actually dealt with the financial lender previously.

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