If you want to sell your home and buy another you’ll be all too familiar with the pressure of timing the sale and purchase so you’re not out of pocket. Luckily, there’s an efficient and simple fix for such dilemmas. When you apply for a bridging loan, you can bridge the gap between the purchase of a new property and the sale of yours. We will delve a little deeper into what a bridging loan is, explain the difference between a residential and a commercial bridging loan, and uncover the simple process of taking out a bridging loan. Finally, we’ll walk you through the main benefits of these loans, such as the fast application process, quick turnaround, and no exit fees.
What Are Bridging Loans?
A bridging loan is a short-term financial arrangement used to cover the gap between purchasing a new property and selling an existing one. These loans bridge the gap between putting down a large lump sum for a property and the eventual return from selling your home. They allow home buyers to purchase properties free from the pressure to sell their houses first, allowing for more flexibility and reducing stress. Loan periods tend to be between 6-12 months and they can be anything from £25,000 to £25 million.
Borrowers have the choice of paying interest on their bridging loan either monthly or rolling it into the final repayment amount. If interest is rolled into the final repayment, no monthly interest payments are required during the loan term. Instead, the interest accumulates and is paid in full at the end when the loan is repaid. If you are unsure which Bridging Options in the UK suits you best, you can discuss your choices with a bridging loan specialist. They will provide professional advice to help you make an informed decision.
Residential and Commercial Bridging Loans
Bridging loans are geared up to support investments in residential property or commercial developments. You can apply for whichever applies best to your specific scenario. Residential bridging loans can be employed as an alternative to a conventional mortgage. They are quick, flexible, and provide peace of mind. Unlike a mortgage, these loans operate on an interest-only basis, meaning borrowers are only required to pay the interest accrued on the loan during the term, rather than making regular payments toward both principal and interest.
Businesses, landlords, property developers, and landowners in the UK can benefit from commercial bridging loans. These are short-term funding solutions that can be used as a kind of interim finance secured against a property or land asset. You can take out a commercial bridging loan over terms as brief as 2 weeks and as long as 3 years.
How to Get a Bridging Loan
To take out a bridging loan in the UK, assess your financial needs, research reputable lenders, and make sure that you meet their eligibility criteria. Then, you can gather all of the required documentation and submit an easy application. This process is fairly straightforward and can be done in a short time. The lender might conduct a property valuation while they review your application, and, when they approve it, they’ll provide you with the loan terms. Seek professional advice if you need it and carefully review the loan terms before you choose to move forward.
Benefits of Bridging Loans
There are several reasons why property investors might choose to take out a bridging loan rather than a mortgage. For one thing, the application process is fast and straightforward. Moreover, bridging loans have a fast turnaround, with most loans taking just 5-15 days to be approved and received. They are a more short-term solution than mortgages and offer less long-term commitment. They do not have exit fees, so you can pay them off and walk away much more quickly and easily than with a mortgage.
As we conclude this quick guide to bridging loans, you should now have a better idea of what these loans are and how to go about taking one out. With bridging loans, there is no need to fret when you want to purchase a property before selling your current home. They take the pressure off fast-paced real estate buying and selling and give you peace of mind that you can have the property of your dreams and not rush the sale of your original property. There are commercial and residential bridging loans, so the same applies to work premises, significantly reducing the stress of moving your commercial business to a new location. Bridging loans boast super quick applications, fast turnaround, and no exit fees, making them low-risk and ideal options.