Some forms of Bridging Loans are not regulated by the Financial Conduct Authority.
What is a bridging loan?
A bridging loan is a tool used to borrow money quickly and for a short period. It is designed to ‘bridge the gap’ when you want to buy a new home before your old one has sold or when buying a property at Auction. A bridging loan is useful and highly flexible if you need the finance quickly. However, it should only be used for short-term lending.
Just like a normal mortgage, the bridging loan is secured against a property. This may be the property you are purchasing at auction, or it could be secured against a property that you already own, such as your home. You should always plan your ‘exit strategy’ before taking out a bridging loan, as it should not be used for long term funding.
Bridging loans attract interest monthly, rather than annually, as people tend to take them for a short period. Typical rates vary from around 0.49% to over 1% per month (at the time of writing), depending on the property and the loan-to-value amount. You will also have set-up fees, usually around 2% of the loan, so it is advisable to only take a bridging loan if you are confident that you won’t need it for a long period of time.
In cash terms, bridging loan providers might lend anything from £25,000 to millions. However, you will usually only be able to borrow a maximum loan-to-value ratio (LTV) of 70-75% of the property value.
This is a more complex form of bridge funding, to be used when carrying out extensive development on a property or building from the ground up. At Aspire Financial Services we have great relationships with many development bridging lenders and are happy to discuss your needs.
Aspire Financial Services can help you
A bridging loan is structured depending on your needs and circumstances. At Aspire Financial Services we understand bridging and match the right lender to your needs.
Don’t guess what to do, Book a free 30-minute introductory call.