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FinanceMike Collins, a Mortgage Expert discusses the meaning of bridging loans and...

Mike Collins, a Mortgage Expert discusses the meaning of bridging loans and how they can benefit you in the current economic climate

A bridging loan is a great option during times of high interest rates.

Bridging loans are interest-only loans that are able to be taken out by people who require funds immediately. It’s basically an intermediary between credit being readily available and debt that is incoming.

This financial aid is open to anyone who wishes to purchase property through auction, or buy the property outright, make construction or renovations, and many other projects when the time is short.

Mike Collins has 17 years of experience in financial planning. He stated: With nearly half of all homeowners losing their home purchase to foreclosure It is crucial that the borrowers can get their house back on the market quickly. A bridging loan could assist them in this.

“Interest Rates for Bridging Loans are higher than other Finance Products. I’ve been asked numerous times recently if people should be worried that interest rates have increased.”

The short answer is that the bridge loan is typically returned within a few months. This allows the interest to be more manageable and the loan affordable. I’ll explain bridging loans in greater detail below, and explain how they can help in today’s economic environment.

Rates of interest for bridge loans

They are able to be fixed and can provide stability, provided you are capable of making the payments for your term. Variable rates of loan can be subject to change according to the Bank of England base interest rate (Sept 2022).

The greater the interest rate the greater your monthly repayments will be.

The rates will differ based on the reason for the loan. Bridging loans for business or land are more expensive than loans for home purchases.

The demand for buyers is very large. This causes delays in the purchasing and conveyancing process. This is why it is more crucial to get bridge loans.

It is crucial to keep in mind that interest rates are calculated on a monthly basis whenever you examine them. This is due to the fact that the term typically runs between 9 and 12 months.

Cash is in your account in a flash

Bridging loans are quicker than mortgage or secured loans, if timing is crucial.

Bridging loans are available in just three days.

Since the lender will be dependent on the exit plan you choose, it’s much simpler to plan your exit strategy. This is the way you plan to pay back the loan once the loan term is over.

If your credit score isn’t excellent, you can obtain a credit card

Your credit score will decide whether you’re eligible for the bridge loan. But, it can affect the rates of interest and the fees you might have to have to pay.

If you’re not able to get credit however, it’s not difficult to obtain a loan. The lenders tend to focus on the value of the property more than the credit score in they decide on rates.

Since the loan is secured by an asset of value There aren’t any lengthy screening processes.

Help in repairing broken chains

Recent research has revealed that one in five applicants needed a bridge loan because of a damaged chain. The chain broke, which caused delays in their purchase and forced the borrower to take out an loan to fill the gap.

Bridging loans can be a feasible alternative to sell even though the typical duration is 4 months.

The current rate of interest could result in a decline in demand for buyers, and, in turn of that, a decline in the amount of bridging loans. These loans can be vital for property developers as well as buyers and other.

Whatever bridging loan option you select, make sure that they’re part of the Financial Conduct Authority. This will ensure that any complaints particularly when they concern huge amounts of money, will be dealt with in accordance to FCA guidelines.

The reason why a business should make use of the bridge loan

Bridging loans are short-term financial options that allow companies to meet their immediate needs or to take advantage of an opportunity that is timely. They can be used to help bridge the gap between buying an asset or property and receiving a longer-term loan. Businesses can use the bridging loan to fund a rapid purchase of equipment or to buy a property to meet a new contract. Bridging loans can be a convenient method for businesses to gain access to capital to help them expand.

What can I do to get a UK Bridging loan

You’ll need to talk to a specialist in corporate lending to get an UK Bridging loan. A lot of banks and financial institutions provide bridging loans. There are lenders who specialise in Bridging loans. The lender will assess your financial and creditworthiness prior to granting you the loan.

More from Mike Collins Mortgage Expert

Mike Collins Mortgage Expert – What kind of property development finance is required?


Sam Allcock
Sam Allcock
With over 20 years of experience in the field SEO and digital marketing, Sam Allcock is a highly regarded entrepreneur. He is based in Cheshire but has an interest in all things going on in the North West and enjoys contributing local news to the site.
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