How much do Bridging Loans cost?

Bridging loans typically have an arrangement fee of 2%, and interest rates of between 0.44% to 1.5% per month.

On a bridging loan of £300,000, this equates to about:

  • £10,800 if your property sells in 3 months time.
  • £16,000 if your property sells in 6 months time.
  • 25,700 if your property sells in 12 months time.

The above assumes a 2% arrangement fee and a 0.49% monthly interest rate. Consult a bridging loan calculator to find out how much a bridging loan will cost you.

What’s the maximum loan to value (LTV)?

Bridging Lenders typically offer the following:

  • Residential 75%
  • Commercial 65%
  • 2nd Charge 70%

What is a Bridging Loan?

Bridging loans are designed to help people complete the purchase of a property before selling their existing home by offering them short-term access to money at a high-rate of interest.

As well as helping home-movers when there is a gap between the sale and completion dates in a chain, this type of loan can also help someone planning to sell-on quickly after renovating a home, or help someone buying at auction.

As banks and building societies have grown more reluctant to lend in the wake of the financial crisis, there has been an influx of bridging lenders into the market.

When to use a bridging Loan?

Bridging loans can be used for a variety of reasons, including property investment, buy-to-let and development.

However, more recently, there has been a growing trend among borrowers to use bridging loans because high street and private banks are taking longer to process applications for larger home loans.

Some borrowers are also viewing bridging loans as a simple alternative to mainstream lending.

While a bridging loan may sound tempting, if you’re thinking about taking one out, you need to think carefully about your exit strategy. This might, for example, involve getting a mainstream mortgage or a buy-to-let mortgage, or selling the property altogether.

Why use Bridging?

The below are the most popular reasons for using Bridging:

  1. Speed – Bridging loans are much quicker than mortgages and can be arranged and completed anywhere between a few days and a month.

  2. Complex Deals – Bridging can be used to solve various complex issues where a ‘standard’ mortgage cannot be facilitated. For example, your about to inherit a property and need to raise finance to buy out a sibling or trustee, this can be done with a bridging loan.

  3. Flexibility – We can source finance on inhabitable properties for example no bathroom and no kitchen. We could source the money to purchase and providing there is room on the LTV we could also fund the cost of the works.

Got any more questions?

Selling your home can be a stressful, tiring and confusing process. At Bridge Finance Direct, we care about our clients and try to take all of that pain away by getting a Decision in Principle. If you’re still not sure how we can help you, give us a call on 01992 568 820.


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