It might seem simple; however it is time consuming to find a bridging loan on good terms. And because time is what you lack, given the fact you want to buy that other property as quick as you can, here are a few tips where you should look for bridging loans:

• You can check the online offers which are plenty; look for offers which guarantee you up to 85% LTV (loan-to –value) or even more, and a longer lending period. Lending periods with bridging loans vary significantly, from one month and up to 3 years at the most.


• If you feel you cannot find a good offer on your own, then turn to professional advice (brokerage institutions), where you will be redirected toward the market’s most suitable and at the same time reliable offers.

Most importantly, you should keep in mind that bridging loans are a temporary financing option, and should not be treated as any other type of loan. You have to be very well determined and motivated when contracting a bridging loan, because if you cannot keep up with the payments and you cannot sell your current property, you might lose it. A good income is necessary and perhaps a savings account as a back-up solution in case anything goes wrong, so that you can repay the borrowed amount.

The terms of a bridging loan clearly specify that there is a great difference in how commercial properties are handled, and how the residential ones are. The commercial properties present a much higher degree of risk to the lender, so this is why the loan-to-value will be much lower. If it is a commercial property involved, expect to receive no more than 60-65% LTV coverage; while the residential properties can go up to 80-85%, sometimes even more. Regarding the interest rates charged, get prepared to paying an interest rate of even 15%, which is a quite high value.

Basically the higher the risk for the lender in undertaking business with you as the borrower, the higher the interest rates charged. You always have to take into calculation all the applicable administrative fees that come with the contract of a bridging loan: appraisal fee, escrow fee, administration fee, title policy, recording fee, notary fee (which normally doesn’t exceed £50), drawing/courier fee. Adding all these fees up, don’t be surprised but the sum may exceed £1,700. That is why the reason for which you are going to contract a bridging loan has to be very well funded and responsibly handled, because only in this way it will prove beneficial to you. Depending on the total amount, there will be imposed certain other fees known as “origination” fees. You will be given points, which translated will result in a certain percentage of the total loan amount. For example, if your loan equals £150,000 that will receive 1 point, which translated is worth 1% of the whole loan amount. This means that the “origination” fee will cost you another £1,500. This is only a rough example, and it certainly depends on the terms and conditions each lender imposes.

Last, but not least here is a sum up of pros and cons of contracting a bridging loan:

Pros:

• A very good option when you are bounded by time restrictions (you have to make urgently the new purchase)


• You may not have to start payments immediately

Cons:

• Costly arrangement/administrative fees


• The nerve –racking period of time until you manage to sell your property in order to be able to clear off the loan.

Learn more about obtaining a Bridge Loan and get a quote.