A Bridging Loan Mortgage
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Looking for a moving house mortgage can be a daunting task, that’s why here at Your Certified Expert our friendly team are happy to answer any questions you may have.
Our certified mortgage brokers are all accredited .
With finance being heavily regulated, the advice you receive will be from a certified broker.
A bridging loan explained:
What is a bridging loan? It’s a short-term loan that helps you cover costs while you’re waiting for money to come in. In the property world, it happens when you buy a property, but your current one hasn’t yet sold, or the funds haven’t been released yet.
A bridge loan is essential if you want to snap up your dream home even if your current property hasn’t yet sold but is on the market or just going through the legal and financial checks before you get paid.
A bridging finance loan is meant to be paid off quickly, which is why they usually only last for a short period, up to a year.
Despite being a short-term option, there are still interest rates and repayment requirements. That’s why you need a bridging loan broker to help find you all the available offers, so you can make an informed choice.
Now, how does a bridge loan work exactly? Unlike a mortgage, which is paid off over decades, a bridging loan is a short-term solution. The key features that set bridging finance loans apart from mortgages include:
- Short term periods: A mortgage bridge loan lasts a very short period of time. Their duration may be as short as a few weeks, and are usually capped at one year (though sometimes you may be able to get 18-month agreements).
- Higher interest rates: Bridging loan rates are far higher than traditional mortgages. It is in your best interest to repay the property bridging loan
- High loan-to-value ratio: Bridging loans usually cover 65 to 80% of the property price you want to buy, so you’ll need to have significant equity or assets to apply for one.
There are two types of bridging loans that you can apply for.
- Closed: This loan is used for those who already have a closed date. For example, if you already have an offer on their existing home and are just going through checks and waiting for the buyer to get an approved mortgage application through.
- Open: If you don’t already have a buyer, then you’ll need an open bridging loans. While there’s no hard repayment date, you will usually have to repay the loan within a certain time frame.
You’ll want to get in touch with a bridging loan broker when:
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- You want to buy a new property before your old one is sold
- You are a developer who needs funds to renovate or develop a property before selling it
- You want to buy a property at auction (and have another income means to pay it off later)
Bridging loans are designed to be fast. If you apply (since it’s secured against the property you buy) you should get it approved quickly.
They’re also very flexible in their repayments. You might make monthly repayments or pay it all (interest and principle) when your original house sells).
Bridging loans aren’t for everyone, as they come with a few disadvantages:
- Higher costs, fees, and interest rates
- Risk of repossession if you don’t sell your current home in time
- Fewer can qualify
You will need an approved bridging loan before you can secure your next home purchase. That’s why going to an independent broker like Your Certified Expert is so worthwhile. Not only can we advise you on this type of loan, we can also connect you to multiple lender offers so you can choose the best option for your circumstances.
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