BRIDGING LOANS

Fill the gap

BRIDGING LOANS

Fill the gap

Bridging Loans

All loans are intended to provide you with access to cash that you don’t have in order to facilitate a purchase. However, while most are mid-to-long term agreements, there are times when you just need to borrow money to ‘bridge’ a gap. This can ring true when looking at self-employed mortgages too, especially when you’re a landlord or developer, which is when bridging loans can be the perfect solution.

Here’s a detailed overview of what you need to know about the processes involved.

What Is A Bridging Loan Designed For?

Bridging loans are primarily there to help you ‘bridge’ the gap in your purchasing chain. The most common situation is when you are wanting to buy a property, but you’re still waiting for the cash from the sale of the existing property to go through. Effectively, then, they are a stop gap measure that can save you from some very difficult situations including missed opportunities.

As well as the process of moving from one home to another, bridging loans may be used to complete renovations on an investment property before quickly selling it on. In either scenario, the sale of a property is where the funds for covering the loan will come from. Landlord and new property developers can use this to great effect at various stages of their commercial journeys.

Are Bridging Loans Suitable?

Bridging loans certainly serve a purpose and can facilitate the purchase of properties where temporary financial obstacles would ordinarily prevent you from completing the transaction. So, if cash flow problem due to issues in the chain are holding you back, this could be the perfect time to use a bridging loan to your advantage and could be key to ensuring that the transactions take place.

However, you should be aware that, unsurprisingly, the interest rates are very high and can equate to well over 1% per month. This is because they are designed to be a temporary measure only. If you are likely to be waiting several months for the primary source of funds to clear, you should look elsewhere. Otherwise, the profits made may be swallowed by the terms of the agreement.

How Can I Get The Best Bridging Loan Agreement?

Bridging loans have become an increasingly popular option in recent times due to the demand for instant results in all aspects of life. There are many alternative lenders that offer this type of agreement while you wait for property sales or standard ban agreements to process. Thanks to the growing range of options, you should always analyse the full details of each proposed deal.

This is the only way you can accurately weigh up the pros and cons to find the best deal. It is advised that you use a bridging loan calculator to gain a clearer insight into which is the right option for your specific needs. Or better still, speaking to a dedicated mortgage broker can provide guidance. Given the sums involved, selling yourself short is simply not an option.

If a bridging loan is something that you are thinking of to bridge a gap for investment, then please do give Active Mortgage a call on 01245 850 165 or contact us here

These articles are for information only and no advice should be conferred from the content within. Please seek independent financial advice prior to taking any action.

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