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Bridging Loans

A bridging loan or bridge loan is a short term loan given to ‘bridge the gap’ between you buying your new house & selling your previous one. Bridging loans can also be used at auctions – where you will need to put down a deposit as soon as the hammer comes down.

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How does a Bridging Loan work?

There are two types of bridging loans, closed and open. With a closed loan there is a fixed repayment date – you will normally be given this kind of loan if you have exchanged contracts but are waiting for a property sale to complete. With an open loan there is no fixed repayment date, but you will normally be expected to pay it off within one year.

Whichever kind of loan you take out, the lender will want to see evidence of a clear repayment strategy; such as using equity from a property sale or taking out a mortgage.

They will also want to see evidence of the new property you are purchasing and the price you plan to pay for it – as well as proof of what you are doing to sell your current property if relevant. You should also have a back-up plan in place for if your repayment strategy fails – for example, if a planned sale falls through.

Bridging loans are quite expensive. Typically, there’s a set-up fee so it is advisable to only take one out if you are confident that you won’t need it for a long period of time.

 

Things to consider before taking out a Bridging Loan

There are a number of key things to consider before taking out a bridging loan, taking the time to consider:

 

Always Consider Total Cost

When comparing products from different providers, always consider the total cost of the loan, rather than just the interest rate. People often chase the lowest interest rate, but many lenders will charge large exit fees, fund management fees and other ‘hidden’ costs.

Always ask for a breakdown of the total cost of taking the loan before proceeding as this makes it much easier to compare different providers.

 

Is Your Repayment Method Viable?

The main danger when taking out a bridging loan is that you will be unable to repay the loan at the end of the term. Always consider how the loan will be repaid upfront and make sure the proposed exit is viable.

If you’re planning to sell your property, make sure the term of the loan gives you sufficient time to find a buyer and for the sale to complete. If you’re forced to pursue a quick sale, you could end up receiving far less for your property than you would like.

If you plan to refinance onto a longer-term loan, you should check that your application is likely to be accepted. Where possible, aim to get an agreement in principle from your chosen lender before completing on your bridging loan.

 

Am I Getting the Best Possible Deal

The difference in cost between different providers can be significant. In addition, some lenders can only be accessed through a limited number of brokers, meaning you may not be able to access the lowest rates.

By checking with 2-3 providers, you will give yourself the best possible chance of securing the best deal.

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Mint Specialist Services

Bridging Loans

A bridging loan or bridge loan is a short term loan given to ‘bridge the gap’ between you buying a new house and selling your previous house.

Secured Loans

Secured loans – also known as homeowner loans, home loans or second-charge mortgages – allow you to borrow money while using your home as ‘security’ (also called ‘collateral’). This means the lender can sell your property if you aren’t keeping up with repayments, as a way of getting their money back.

Expat Mortgage

An expatriate (often shortened to expat) is a person either temporarily or permanently residing in a country other than that of their citizenship

Portfolio Mortgages

There are now 2.5 million landlords in the UK and successful investors have been able to establish a Buy to Let portfolio of a number of properties. But changes by the Prudential Regulation Authority have introduced new checks for Buy to Let portfolio mortgages.

Offset Mortgages

The idea behind an offset mortgage is simple and straightforward. By linking your mortgage and your savings, you can bring down the cost of your loan. This is because rather than earning interest, your savings reduce the amount of interest you pay on your mortgage.

Self Employed Mortgages

ne of the misconceptions about the mortgage market is that it is now very difficult for self employed people to get a self employed mortgage loan in order to buy a home. It’s certainly true that one type of mortgage used by the self employed in the past (self certification mortgage) is no longer available – but for many self-employed people, their chances of being able to borrow are still just as good as anyone else’s.

Contractor Mortgages

Being a contractor can offer you flexibility and independence, but also uncertainty – especially when buying a home. But as the number of freelancers and independent contractors in the UK climbs, don’t despair – many mortgage lenders could be willing to lend to you, even if your income jumps around.

Self Build Mortgages

Building your own home is not for the faint hearted. And on top of everything else, you’ll need to take out a special self build mortgage to finance it. We can walk you through the self-build process step-by-step, from finding land to hiring professionals to help you.

Private Bank Mortgages

Many borrowers needing a larger loan are unaware of the bespoke offerings that private banks have. With a product specifically tailored for you and your income, you may be surprised what our relationships in this area can achieve.

Commercial Mortgages

Are you looking to expand your business? Have you realised that the cost of renting has become too great? If so, you might find that a commercial mortgage can offer business finance options you weren’t aware of. Here’s everything you need to know.