Independent financial advice - bridging loans

Take independent financial advice if you are considering a bridging loan

Why would you need a bridging loan?

Bridging loans are a short term option, and are generally for 3 to 6 months, and you should only consider a bridging loan if you are sure you can repay it within 6 months. You might need to take independent financial advice about a bridging loan for the following reasons:

To purchase a property quickly, for example by auction.
To enable the purchase of one property before the completion on the sale of another, for example if you are stuck in a chain or if your sale falls through at the last minute.
Temporary funding for the purchase of a 'defective' property, pending completion of repairs and draw down of a long-term mortgage.
To fund the purchase of a property pending the arrangement of a long-term mortgage. This could apply for example to an investment property purchase when there is insufficient time to arrange a buy-to-let mortgage to complete the purchase.
To avoid mortgage repossession upon independent financial advice.

Bridging loans can expensive and are usually considered to be a last resort. But if a bridging loan can tide you over in the short term then the extra expense may save you from losing money already spent in the purchase process, as well as reducing stress.

Are there different types of bridging loan?

There are two main types of bridging loan: the 'closed' bridge and the 'open' bridge. A closed bridge is only available to homebuyers who have already exchanged on the sale of their existing property. Very few sales fall through after exchange, so lenders are happy to offer closed-bridge financing.

An 'open' bridge is taken out by buyers who have found their ideal property, but may not have put their existing home on the market. A lender will insist on you having lots of equity in your existing property so get your paperwork in order before you take independent financial advice.

Commercial bridging loans

Short term in nature, the application process for a commercial Bridging Loan is similar to that of a standard loan. As the need for a commercial Bridging Loan often arises with little advance notice, being pre-approved for such a loan is a smart move.

Commercial Bridging Loans are usually interest only meaning that the borrower pays only the interest on the loan each month. The borrower continues with this repayment plan until the property the loan is being used for is sold. When the sale finally does occur, the proceeds of that sale are used to repay the principal. The principal payment typically is in the form of a one-time, lump-sum payment, but take independent financial advice for further details.

You can have a brighter financial future. If you would like independent financial advice about bridging loans call our experienced advisers today on 01424 777 156 or e-mail mike.robertson@mraltd.com