Bridging Loans

Bridging Loans are used for many different situations

Bridging loans, sometimes referred to as short term loans are useful in many different situations. The amount a lender is prepared to lend would depend on the security offered. Some lenders would consider extra security if there is equity and may consider taking a second charge on those other assets. Bridging loans are secured on property.

When a bridge loan is taken out, it is important that the exit strategy is considered. If it is considered a regulated bridge loan, then it is secured on your residential home. Lenders would want to know what is the exit before the loan is agreed and may want to see you have an offer in principle. However, an unregulated bridge loan would be secured on on commercial property, buy to lets. Loans can also be used for paying a tax bill.

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Why are bridge loans used and for how long

Bridging loans can be used for purchasing property quickly in the UK. Often it is used for the purchase of property at auctions as speed of completion is important. If you are purchasing a new residential home and stuck in a chain, you may be able to arrange a bridge loan to complete the purchase and enter the bridging loan market quicker. It is sometimes used by investors to purchase below market value properties. Putting the investor in a position of strength that they can complete the purchase quickly.

The bridging loan market is not always easy to get into. A bridge loan is short term lending. The maximum period for attaining a loan is usually 24 months, but it is more usual to 6 to 18 months. The loan can be repaid anytime during the term, but some lenders would charge a minimum of 3 months interest.

How is the interest paid on a bridging loan? There is an option either to service the loan or the interest can be retained. If the interest is retained, it is deducted from the gross figure at the start of the loan. If the bridging loan is repaid early, then any interest not used would be returned. As an example, the loan was taken to 12 months, and it was repaid in month 9, then 3 months of the retained interest would be returned. If you have any specific queries relating to bridging loans please do not hesitate to get in touch with us today.

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Your home is at risk if you fail to keep up payments on your mortgage or any other loans secured against it.
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Buy to Let mortgages and Commercial Lending are not usually regulated by the Financial Conduct Authority.

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