Bridging Loan Calculator by Revolution Brokers:
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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
The crucial ingredient in assessing the validity of any bridging finance application is the borrower’s ability to prove that they have a credible source of capital from which they can repay the loan. This could take the form of selling or liquidating the asset, remortgaging the loan onto a longer-term product or deriving funds from other external sources.
It should be remembered that an LTV of between 70% and 75% is always secured against the value of the property itself, and that bridging loans comprise a more expensive source of financing when compared to conventional mortgages. However, there are circumstances in which the long-term profitability of the property or project in question makes up for these additional costs, while the availability of up-front cash from a bridging loan can also be instrumental in securing a particular property, whether it be for residential or business purposes.
So try out our Bridging Loan Calculator today to get an idea of what you can borrow on a Bridging Loan.
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.
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.