Bridging Loan Solicitors
(Last Updated: 29/07/2024)
04/10/2022
18
5 min read
Property management can be a stressful project as far as time-management is concerned. When changing your residence, you will want to sell your current property and match the timeline with buying a new one. What happens if this doesn't go as planned?
If your own buyer decides to not go through with it, you might be in desperate need of funds to acquire your dream home. Similarly, if you acquire a property in an auction, whether to live in or renovate and sell for a profit, you might find that you need extra capital.
To prevent this from happening, you can take out a bridging (or bridge) loan. This will grant you the necessary funds until you can get access to your own. This may seem too complicated, so you can always turn to bridging loan solicitors.
What is a bridging loan?
A bridge loan is a short-term financing solution for instances when you don’t have immediate access to funds. Provided you meet the lender’s criteria, it allows you to bridge the gap and borrow the amount you need.
Because of the nature of this product, and the high risk involved for the lender, bridging loan rates will usually be higher, and you may also need to pay for one-off product fees.
For bridge loans, if you choose a rolled-up interest, you do not need to make monthly payments. Usually, the debt is repaid in full, together with the interest, at the end. Bridging loan rates are higher than regular ones, so you need to make sure that you can afford to repay your debt.
Generally, you will need a good credit score, since personal income is not a factor that weighs in. The most important thing is to have a good exit strategy, which is the certainty that you will get access to funds in the future and therefore will be able to pay off the debt.
Is a bridging loan cheaper than a mortgage?
Bridging loans can be associated with mortgages, but they are different products. While a bridge loan is similar to a short-term mortgage, its differences are significant.
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How much can you borrow with a bridging loan?
Generally, there is no set limit on how much you can borrow with a bridge loan. Lenders will make a decision on a case-by-case basis.
As long as you can convince them that you will definitely get access to your funds and thus be able to repay off the debt, you will be able to borrow as much as you need.
Looking for a bridging loan product?
It might be best to ask for help with your loan. Independent mortgage brokers have a solid knowledge of the market and can advise you on the best loan product and deal for you.
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Which banks do a bridging loan?
There are a few high street banks which offer bridging finance, such as Lloyds Bank. However, in most cases, this product is offered by specialist lenders.
The difference between mainstream banks and specialist lenders is their flexibility. While banks have a more rigorous list of requirements, specialist finance brokers usually target borrowers who do not meet those requirements, but still have the ability to repay a loan. Getting a regular mortgage with a high-street bank is directly proportional with your personal income.
However, for instances where one would need a bridge loan, for example, that becomes irrelevant. A lender will be interested in the market value of the property instead and your ability to access the capital.
Is a bridging loan risky?
Bridge loans posses a number of risks, for both the lender and the borrower. From a lender's perspective, they are granting you a large amount of money under the premises that you will gain access to a cash flow in the future. Should this be the case, you will repay the debt and pay a high interest, therefore making them profit. If you fail, they suffer financial losses.
A bridge loan is secured. This means that the lender will want to make sure they can recover their investment, and will secure it against an asset, usually your property. Should you fail to repay your debt, the lender can repossess your property and recover their loss.
Because of the possible risks involved, as well as the expensive nature of this loan, specialist lenders will ask you to get Independent Legal Advice. This will ensure that you understand the terms so you can make an informed decision, with no nasty surprises.
Independent Legal Advice from Bridging Loan Solicitors
Your lender will require a certificate of advice from a solicitor, to prove that you have fully understood the loan agreement before you sign. Get in touch to book with our hand selected panel solicitor for clear, no nonsense advice.
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Written by:
Laura Cristian
Laura has a talent for data analysis and fact-finding. She is an advertising graduate with a broad range of skills in the web marketing field within conveyancing sector. She works closely with our panel of solicitors and surveyors to understand our clients' needs and challenges and to write the most valuable content for you.
Reviewed by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
