Bridging loans have been a viable option for people who cannot afford to buy another house because their existing property has not yet been sold. There are several factors you must consider before applying for bridging a loan.
What are the types of bridging loans available?
There are two types; the first allows the individual to obtain the bridge with the primary purpose of paying off existing mortgage, and secondly is to provide enough funds to make a down payment for a new property. With this kind of loan, you will only pay the mortgage from your new house. But, once your existing home sells, you will pay back all the interest and balance on the bridging loan at that point.
How Does The Bridging Loan Work?
The procedure varies with different lenders, and there are different terms that are offered. One common condition is being given a deadline to repay and settle the advance. Most are expected to repay after a few months, or when their house sells.
Bridging finance is usually repaid within 6-18 months as the rate of interest can make it too expensive for the borrower. Developers have been using bridging loans to take advantage of market conditions for years. Being able to acquire property almost immediately has many advantages eg: negotiating better prices, timing over your competition as well as complying with auction rules.
How much can I borrow?
We lend from £50k to £10m, we see the average application at around £500k with the minimum we lend on agreement would be £25k. This type of finance will always require security, either on commercial, residential or land. We can lend higher loan to values (LTV’s) on residential property, than on commercial or land, but its always worth speaking to us first to get clarification. Subject to your enquiry being within normal working hours, we can usually advise if your loan is accepted over the phone. And receiving your funds takes around 3 days depending on your circumstances.
Why use bridging loans?
Speed – Investors are using bridging loans more often now, as a useful way to accelerate completion of their project. We regularly offer funds to clients within 7 working days, but in urgent cases funds can be issued within 36 hrs.
Property condition – Many lenders, especially with a buy-to-let mortgage, will often put a full retention on a mortgage if the property is without a kitchen, no bathroom or is in a poor state. We do not operate this retention method, and instead lend on the value of the property in its current form.
Chain – You may have found the perfect house, but can not sell your current property within a given time frame. In these circumstances, we will provide bridging finance secured against your current property in order for you to transfer your current mortgage to the new property. You then pay the bridging loan once the sale of your current property is complete.
2nd charge lending – This can be very useful if you have a large amount of equity in your property, and require funds for a short period of time (up to 12 months) and you would favour a 2nd charge loan, rather than a remortgage.
We can offer property development funding for extensions, single or multiple house plots, or small office or residential developments, shops, flats, conversions and barn conversions. In fact we will consider most types of development projects.
When we are content with the development plan, we will then discuss with you how the project is to be handled. In many cases, once the development is started we can finance the costs by stage payments, according to our surveyor's financial assessments of the project on a periodic basis.
We differ from other lenders, as we can offer personal attention and support at all times, through the funding stage and the development process. This enables the building work to be complete within the specified time. Major bank’s wont generally agree to lend on these small projects, and will only offer lending proposals on completed developments.
You will be speaking to the decision makers, and will receive swift answers to your questions and a decision regarding your finance. So we have an advantage over High Street banks regarding providing you with a fast decision, and being able to finance projects which bank’s could not.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
Rates from 9.3% APR, to 32.7% APR are available, our highest rate is for customers with severe credit problems. 16.7% APR is typical (for example purposes only) but subject to status. Calls may be recorded for training purposes. A fee of 0% up to 15% may be charged. The Loans Engine processes all loan applications.
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