Bridging Finance Guide – What is a Bridging Loan?
What is a Bridging Loan?
A Bridging Loan is short term funding to provide temporary financing until more permanent finance can be found. Bridging Loans are available for a whole range of financial requirements and can be on the basis of a 1st, 2nd or even 3rd charge equity release, usually provided for any legal purpose.
Examples:Â
Commercial & Residential Purchase Commercial & Residential Refinance Auction Purchases Capital Raising * Chain Breaking Refurbishment Speculative Deals Business Cash Injection Defective Property
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* Capital raising funds can be used for many reasons including holidays, overseas property investment and tax bills etc.
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Residential Property Commercial Property Land (with or without planning permission in place) Real Property (such as Plant machinery)
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Bridging Loans carry a higher interest rate than standard mortgage lending and at the offer of loan stage there will be an agreed term of repayment, normally between one day and two years.
Bridging Loans are most commonly used when the financing requirement is urgent and beyond the timescales that a standard mortgage lender or bank could provide. In some cases Bridging Lenders can provide funds within 24 hours. Another common use of bridging finance would be to fund the purchase a new home prior to the existing property being sold.
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Bridge loans will almost certainly carry higher fees which can include:Â
Administration Fees Arrangement Fees Legal Fees Completion Fees Valuation Fees Exit Fees ** Broker Fees (normally non-disclosed)
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** A fee charged to redeem the loan, typically equivalent to one monthâs interest payment.
As most bridging Loans are not regulated by the Financial Services Authority the above fees can vary substantially as they fall within no boundaries or guidelines, only competitive pricing.
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