|
Bridging loans
information
Bridging loans are
short term loans arranged when you need to purchase
a house but are unable to arrange the mortgage
for some reason, such as there is a delay in selling
your existing property and you do not want to
loose the property you have found, maybe the sale
of your property fell through but you still want
to continue with the purchase of another property,
or the mortgage you want to arrange is subject
to some repairs being carried out first. A bridging
loan can also be used to raise capital pending
the sale of a property.
Bridging loans attract a higher
rate of interest than a mortgage but there is
usually no minimum period for which they can be
taken out. They are looked on as short term lending
to cover a specific short term need. They are
usually secured on the property.
Because the loans are very short
term they can be for a higher percentage of the
property value as the lender is less concerned
with property market fluctuations. The lender
is more likely to look at the value of the property
rather than the purchase price and may be willing
to lend up to 100% of the value of the property.
Therefore if you have found a property where your
purchase price is less than it valuation, perhaps
because some work needs to be done on it, then
you may be able to arrange a bridging loan for
more than the purchase price. This will have to
be arranged with the lender, and will vary from
lender to lender.
Because of the nature of bridging
loans they can usually be arranged at short notice
and within a few days. If the sale of your property
falls through, you may not have much time to arrange
a bridging loan, and this situation is accepted
by lenders, and they are geared up to make to
fast decisions.
When considering a bridging loan
please remember that you may be paying not only
for the bridging loan but also for the mortgage
on your existing property, if the reason for the
bridging loan is that the sale of your old house
has fallen through. Whilst selling your old property
may appear easy, if you need to secure the right
price for the property and that price is at the
top end of the market level, then the sale may
not necessarily be a quick sale.
If finances are very tight and you
are reliant on closing the bridging loan early
you will be well advised to consider the situation
carefully.
If the bridging loan is set
on the new house until you can set up a mortgage
then please note there their may be a difference
between what a lender will lend on a bridging
loan and what might be available in the mortgage
market. If the mortgage on the new property was
less than the bridging loan then you would need
to pick up any shortfall.
|
loans-uk.org.uk
