Finance UK

Applying for a bridging loan means that you will have to provide the lender you’re your personal details. This will include employment history and a financial history. They will need to check your current financial situation with regards to outstanding debt and expenditure. This is in order for them to assess your credit history by their relevant credit scoring system. This will then advise them of your suitability with regards to the potential loan that you have applied for.

When you find yourself in the situation of finding your dream home to buy but have yet to sell your own home, a bridging loan might be able meet the financial demands placed on you. Buying and selling property is an extremely stressful position to be in and finding a home that’s right for you can be demanding. Therefore, knowing that a bridging loan could provide an alternative way of funding the buy side of the process can ease the pressure placed on you at a difficult time.

A bridging loan is designed to be a short term loan; it differs from a conventional mortgage as they are spread over many years. This is due to the fact that a bridging loan should only be in place while you wait for a buyer for your own home. Bridging loans tend to be in the form of a secured loan, therefore meaning that you will have to secure the loan against either your current property or the property you are proposing to purchase.

Bridging Loans:

There are two types of bridging loan; an open bridging loan, which is where the sale of your property has not gone through and you have found a house that you wish to purchase. Or a closed bridging loan which is where you have sold your home, but there is a delay in receiving the funds to pay for the purchase of your new property.

When considering a bridging loan you should think about the maximum amount that you need to borrow. As a standard guide you could potentially borrow between £25,000.00 and £250,000.00, this of course differs between lenders and your circumstances. To enable the lender to calculate how much you can borrow, they will look at the value of your property. They will then be able to assess this against how much you need to borrow. Typically, you will be able to borrow a percentage of the value of your property but this will differ between lenders.

Many lenders have now been set up on the internet to accept online applications for loans. These lenders tend to specialise in bridging loans and its often wise to research thoroughly as a competitive market has enabled them to offer a variety of deals. Some of the companies that specialise in bridging loans will often be able to process the loan much quicker than a standard lender. If you feel that that an online application doesn’t meet your requirements, you should look at contacting your existing bank or lender for further information.

Once your initial application has been accepted, your current home will have to be valued. This will sometimes incur a fee payable by you to the lender in order for the valuation to go ahead. This will indicate to the lender that the loan amount is in accordance with the value of your home. If you need the loan very quickly, you will have to advise your solicitor who can then act on your behalf and process all the relevant conveyancing associated with the purchase of your new home.

When the loan has been approved, you will be notified of the interest rate applicable for the repayment of the loan. This will calculated in accordance with the bank of England base rate. Depending on the lender, the rate can be set at percentages above the base rate. Depending on the bridging loan taken, the lender can also charge a rate that is a percentage of the loan that you require to purchase your home.

Most people when buying a new home will be involved in a chain, with a buyer lined up for their home and a house that they are looking to buy also lined up. This can be a very stressful time as the contracts have yet to be exchanged and so the purchase of your new home is not secure – if someone in the chain pulls out you may find that you are unable complete on your sale and so lack the money needed to purchase your new home. Bridging loans are designed for situations when the sale of your house has been delayed, giving you the money you need for the purchase.