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Are You Familiar with the Modern Bridging Loan?
While bridging loans have traditionally only ever been used to “bridge” the gap when one link in a property chain has broken down, the practice of using bridging finance for other purposes has become more common in recent years. This has come about due to a variety of different contributing factors.
For starters, people have grown weary of the lengthy processing times that it often takes traditional banks and building societies to handle applications. As a direct response, a plethora of specialist lenders have sprung up in the marketplace, with certain companies offering bespoke bridging finance services. With greater specialisation in the sector, there is now a far larger range in terms of product choice, with each different product offering its own unique terms and conditions. For buyers who need to complete a deal quickly, these kinds of services can prove to be very attractive indeed, meaning that bridging loans are now used for a wide variety of different purposes.
There's a number of reasons why a bridging loan may make sense for your particular situation. These can include:
In addition to the above scenarios, there are also a number of slightly less conventional purposes to which bridging loans are being put nowadays. These include:
One of the primary attractions of a modern bridging loan is the multitude of options that they offer with regard to specific fees and repayment terms. For example, both fees and interest accrued can be paid off during the period of the loan, meaning borrowers can access between 70% and 75% (and, on rare occasions, up to 80%) of the loan-to-value (LTV) ratio at the outset of the arrangement.
Alternatively, borrowers may wish to stipulate that all fees and interest accrued are to be added to the loan itself and become repayable at a specified date. In this case, the value of such expenses would be calculated at the outset and then subtracted from the overall LTV, resulting in a final LTV of around 60% to 65% accessible at the outset. In this way, less funds are available immediately, but no repayments take place until the loan expires.
Other aspects of bridging finance to consider
What is a Bridging Loan Calculator?
Our bridging loan calculator is a vital financial resource that streamlines the evaluation of bridging loans, which serve as short-term funding solutions designed to address immediate financial requirements while awaiting longer-term financing arrangements. Whether you are a homeowner navigating the transition between properties, or a business in need of swift capital, this calculator offers a precise and user-friendly method for estimating monthly repayments, interest expenses, and overall loan viability. By entering essential parameters such as loan amount, interest rate, and duration, users can quickly access critical insights into their borrowing options, empowering them to make well-informed financial decisions tailored to their specific needs and objectives.
How To Use Our Bridging Loan Calculator
A bridging loans calculator is an essential resource for individuals and businesses seeking temporary financing while awaiting long-term funding solutions. This sophisticated tool enables users to swiftly assess potential interest rates and monthly payments for bridging loans across the UK.
By providing precise estimates, borrowers can effectively compare various lending options, gaining a comprehensive understanding of their repayment obligations. This clarity allows them to identify the most economical choice for their needs. The advantages of using a bridging loan calculator are numerous, including time savings and a reduction in the likelihood of unexpected costs. Rather than grappling with complex calculations, users simply input essential information such as the loan amount, term duration, and anticipated interest rate.
The calculator efficiently processes this data, delivering accurate financial insights within moments. This speed is particularly beneficial in fast-moving real estate markets, where timely decisions are crucial.
Furthermore, by elucidating bridging loan rates in the UK prior to any commitments, these calculators empower borrowers with the confidence to make informed financial choices.
Why You Should Use Our Calculator
Utilizing a bridging loan calculator is instrumental in obtaining accurate estimates that inform your financial decisions. This tool not only assists in identifying the most appropriate lender for your specific needs but also ensures that you make well-informed choices. By providing detailed cost estimates for your loan, including interest rates and any additional fees, the calculator offers a comprehensive view of your financial obligations.
This resource eliminates uncertainty, laying a solid groundwork for your financial planning. Borrowers can gain valuable insights into their potential monthly payments and the total costs associated with the bridging loan, which is essential for effective budget management and ensuring that the loan aligns with their financial capabilities.
Employing a free bridging loan calculator simplifies the financial planning process, allowing you to understand precisely how much you can borrow and what your repayments will entail over time. This clarity facilitates smarter budgeting decisions, helping you avoid unexpected expenses or funding shortfalls. By knowing these details in advance, you can establish a realistic repayment timeline, which is crucial for maintaining financial stability.
Moreover, leveraging this tool supports strategic investment decisions, particularly when transitioning between properties or addressing short-term financial gaps. It provides insights into how varying loan terms and interest rates can influence your overall financial strategy. Equipped with this knowledge, making informed choices about loans becomes more manageable, aligning closely with your long-term financial objectives.
FAQs
What is a bridging loan and how does it work?
A bridging loan is a short-term financing option designed to provide immediate cash flow while waiting for longer-term funding or the sale of a property. Typically used in real estate transactions, bridging loans can cover the gap between purchasing a new property and selling an existing one.
Who can apply for a bridging loan?
Almost anyone can apply for a bridging loan, including individuals, limited companies, and limited liability partnerships. Lenders often consider various factors beyond credit scores, such as the value of the property being used as collateral and the borrower's overall financial situation. This flexibility makes bridging loans accessible to a wider range of borrowers, including those with less-than-perfect credit histories.
What are the costs associated with bridging loans?
Bridging loans typically come with higher interest rates compared to traditional mortgages due to their short-term nature and the speed at which they are processed. Interest is usually charged on a monthly basis, and borrowers may also incur additional fees, such as arrangement fees and valuation costs.
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
FCA disclaimer
The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.