The right mortgage for you depends on many factors, including your budget, credit score, life stage, deposit size, the type of property you’re buying and
The right mortgage for you depends on many factors, including your budget, credit score, life stage, deposit size, the type of property you’re buying and
Bridging loans are designed to help borrowers financially ‘bridge the gap’ when buying a property.
Finding the right bridging loan to suit your specific requirements isn’t always easy, but with the experienced mortgage advisors at UKMC we can search through thousands of products on your behalf to help find one most suitable for you.Â
With over 500 five-star reviews, our expert mortgage and finance brokers provide top-tier service, ensuring you get the best short-term funding options for your project.
We can help you understand your options based on your specific financial circumstances, credit history, and loan requirements.
Bridging loans, also referred to as bridge loans, are a type of short-term loan taken out when you want to borrow a significant amount of money over a short period of time. Â
As a type of secured loan, bridging loans require an asset to be secured against them. In most cases, this asset is one property but could be several properties, especially when borrowing larger sums.Â
Typically, bridging loans in the UK are taken out by landlords, homeowners, and property developers, and are used for either buying a home, property investment, or property development.Â
Usually, these loans are paid back over a matter of months, not years, as they’re often used while the borrower is waiting for funds to be made accessible from the sale of something else.Â
An open bridging loan is available when you don’t have a clear exit strategy, though you must still ensure repayment when due. Since these loans are riskier for lenders, they often have higher interest rates, and the lender must be confident in your ability to repay.
A closed bridging loan requires a clear repayment plan with a fixed date for full repayment, known as the “exit strategy.” The lender views this as a low-risk situation, so closed loans generally come with lower interest rates than open loans.
What Are The Benefits?
The biggest benefit of bridging loans is you can act faster as you don’t have to wait for funds to be released. Whether you want to buy a house but you’re part of a chain, or you’ve bought a property at auction and need funds as soon as possible, a bridging loan could accelerate the process
When it comes to repayments, open bridging loans offer borrowers more flexibility. Not only that, many bridge loan lenders won’t apply early repayment charges either.
Unlike a mortgage which requires monthly repayments, bridging loans and their interest can be paid at the same time in one lump sum.Â
What Are The Risks?
As with most short-term loans, bridging loans do tend to come with higher interest rates than mortgages as they’re designed to be repaid quicky. Â
If something goes wrong and you can’t repay the bridging loan by the repayment date, then the lender will place a ‘charge’ on the property you secured the loan against.Â
This allows them to secure debt by taking repayment from the sale of a property.Â
There are extra fees and charges you may not be aware of when considering a bridging loan.Â
This can include administrative fees, exit fees, and arrangement fees.Â
Bridging loan lenders are often more interested in the location, condition, and type of collateral (property secured against the loan) you have. You must, however, be at least 18–years–old to apply for a bridge loan.
Most lenders that offer bridging loans will require property as security to ensure the borrower can cover the loan amount with sufficient high-value assets.Â
Bridging loans can be high risk as if the loan is not repaid on time, then the lender could claim and sell the secured property as collateral. Having a clear financial plan is therefore essential to helping to prevent the loss of your property.Â
Bridging loans are designed to be a short-term loan, so they often need to be repaid in full within 12 months, though some lenders offer longer repayment terms of up to 18 months.
You’ll need to figure out how much you want to borrow. The amount you can borrow will be dependent on a wide range of factors which your adviser can explain to you.
Your mortgage broker can provide expert advice regarding the market and bridging loan rates which can help you to achieve a suitable rate. Â
Your broker will compare the deals available and find the most suitable option for you.
Lenders will want to ensure you have a clear exit plan – one that illustrates how and when you’ll repay the loan. Your adviser and accountant can help with this.Â
UK Mortgage Centre Limited is an Appointed Representative of Refresh Mortgage Network Limited. Refresh Mortgage Network Limited is authorised and regulated by the Financial Conduct Authority. We are entered on the Financial Services Register under firm number 1019794.Â
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages.Â
The Financial Conduct Authority does not regulate will writing and taxation and trust advice.
You may be charged a fee for your advice. A typical fee is £495, which would be payable when you receive your mortgage offer. Your dedicated advisor will discuss this further on your free initial phone call.
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