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Financial Services > Mortgages > Bridging Loans > Bridging Loan Types
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Bridging Loan FAQs

As a bridging loan provides instant funds in the form of a short term loan, they are used in a number of financial situations and borrowers often have a variety of questions about bridging finance.

Why a bridging loan and how do they work?

A bridging loan provides instant funds in the form of a short term loan where the client requires funds immediately and their circumstances limit their options to take out an ordinary high street loan or mortgage.

Most commonly, bridging loans are taken out to cover the costs of purchasing a new property or land before sales on existing properties are completed. Bridging loans are secured on the client’s assets which are professionally valued.

What assets can I use to secure a bridging loan?

A number of assets can be used to secure a bridging loan including:

  • Residential developments
  • Commercial developments
  • Residential property
  • Commercial property
  • Mixed use property (part commercial/part residential)
  • Owned land
  • Owned retail properties
  • Owned offices

How much can I borrow?

A borrower can apply for a loan from between £30,000 and £10 million, the amount of money that can be applied for is based on the market value of the assets on which the loan is to be secured and is normally limited to a certain percentage, for residential property this is usually 85 percent of its value, for land it is 70 percent and for commercial property it is usually up to 65 percent. If additional assets are put forward to secure the loan these percentages can often be increased.

Why would I want to take out a bridging loan?

People take out Bridging loans for various reasons including:

  • Buying a new property before the sale of an existing property is completed
  • Purchasing a property at auction
  • As a means of equity release for debt consolidation, investment property purchases, renovation or business funding
  • Purchasing land for building by developers, builders, investors and self build consumers
  • As a method of injecting funds into a business or buying commercial property

How much do bridging loans cost?

The price of bridging loans is different according to the type of land or property it is being used for. The majority of the time a consumer would be looking to incur costs of between 1.1 percent and 1.5 percent however this it is likely to be more than this if the client has a bad credit history.

What other fees do I have to pay?

Often there is an agreement fee and a valuation fee which is dependent on the value of the property.

What is the term of a bridging loan and is it possible to pay it off early?

Normally a bridging loan is a short term loan which is repaid after 6 months if not before, however it can be agreed to last as long if necessary.

Where can I get a bridging loan?

A bridging loan can be taken out from a selection of high street lenders however it is possible to obtain better rates through specialist lenders.

What is bridging finance?

Bridging finance is an alternative term for a bridging loan

What size is the bridging loans market?

Bridging loans are a common tool used in the property industry as a means of quick funds; it is believed that at any point during the year there is over £2 billion worth of bridging loans in use.

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