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Bridging Loans

In recent times, the need to quickly secure funds to purchase a property has been on the increase in the UK, especially in London and its environs. However, sometimes, the cash to completely purchase this asset may be unavailable at the time. This situation is where a Bridging Loan comes in handy.

Bridging loans are a type of funding option, designed to last for a short duration, where borrowers who intend getting a new property with money from the sales of their current property can get financial support, while they are yet to sell off their current property.

How Bridging Loans Work

This loan is a short-term financing option that bridges the gap between the sale of a property and the purchase of a new one. Bridging loans last for a period of 2 weeks to 12 months. The way a bridging loan works is that it uses the value of your property to help you secure a loan for a new property. Any individual or even a business organization can access this loan.

The stages below illustrate how a bridging loan works

1. Application

It is important that background check and inquiries are carried out first before proceeding with filling an official application for bridging loan.

We have a team of experienced and customer friendly bridging loan officers that are available to answer all your questions, and also guide you through the rest of the bridging loan process.

2. Approval

This stage only takes a couple of minutes. At this stage, we will process your bridging loan application and then accept/approve your loan request after which we will then issue you a quote for the loan if you are comfortable with the terms of the agreement.

3. Appraisal/Evaluation

This phase is where the property you are using to secure the loan is appraised and evaluated. However, not all loan programs require an appraisal of the security asset. All legal paperwork will also be processed at this stage.

4. Disbursement

This stage is also known as the pay-out stage where you immediately receive the funds.

Why People Take Out a Bridging Loan?

Typically, people who take out bridging loans are those who plan to possess a new property but are yet to find a buyer for their existing property, especially if they’re buying at an auction. These loans save them the risk of running into debts for having more properties than they can handle.

Bridging Loan Types

Bridging loans come in different forms and structures. Listed below are the types of this loan

  • Fixed Rate Bridging Loans
  • Variable Rates Bridging Loans
  • First Charge and Second Charge Bridging Loans
  • Closed-Bridging Loans
  • Open-Bridging Loans

In this type of loan, the interest rate remains flat over the entire loan period. This means that a set regular payment is maintained across the loan term.

This is like the direct opposite of the fixed rate bridging loan. Here, the interest rate is not constant, so the monthly payments vary throughout the loan duration.

The terms ‘first charge’ and ‘second charge’ indicate who bears the burden or responsibility of paying off the loan in case a default occurs. Here is an example to illustrate this.

Let’s say you take out a bridging loan for a new property you intend to purchase, with a mortgage still existing on your current property, then that lease is a first charge loan as against your existing property. But if your current property (instead of your mortgage) bears most of the responsibility in your collection of the loan, then it is a second charge bridging loan.

However, your mortgage still bears the repayment responsibility if you lose your current property through repossession. If the bridging loan is used to clear the existing mortgage or the property you are buying is used to secure the bridging loan, then the bridging loan is also a first charge loan.

Closed-bridge loan is a form of bridging loan that is characterized by fixing a date for which the loan has to be completely paid off even before taking out the loan.

That means you have to be confident that you have a means of clearing the loan before the set date. So, this type of loan is for a borrower with an exit plan before the loan is due

This form of loan does not have any set date for complete repayment. Borrowers who take this type of loans are either planning to buy a new property but are yet to sell off their existing property, or invest in a property buy renovating it for resale.

Bridging Loan Rates

Bridging financing is typically a high-interest loan option compared to other conventional loan options. Since it is a short-term loan, the interest rate is usually expressed as monthly rates. Although, these monthly rates could translate to Annual Percentage Rate (APR).

For example; an interest rate of 1.2% monthly translates to 14.4% APR.

Commercial Bridging focuses on giving you the best bridge financing, at an affordable rate too. We use our highly efficient bridging loan calculator to find the best deal for you.

With our bridge financing calculator, we can determine

  • A suitable and affordable interest rate for you
  • A loan repayment amount that will be convenient for you
  • Amount of your monthly payment
  • The overall loan amount (including any fee)

Depending on the bridging loan program you choose, you could repay the interest amount monthly and then pay off the main principal when the loan is due. This system is ideal if you have a steady monthly earnings or cash flow.

Bridging Loan Uses

If getting this fast loan is secured with a commercial property, then it is a Commercial Bridging Loan. A typical bridging loan can serve many purposes, like

  • Buying a new property, especially in an auction. A bridging loan can provide you with more bargaining power in your quest to quickly purchase a new property.
  • Preventing repossession when you are on the verge of losing your property.
  • Paying for a large order in situations where you have to make a full stock purchase.
  • Supporting a running business; when you are experiencing some financial challenges and need urgent funds for financial support.
  • Clearing outstanding bills and update payments like your taxes and other utility bills.
  • Real estate investment
  • Buy-to-let funding
  • Renovating a property
  • Developing a property
  • Refinancing your current loan


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