Mind the Gap: Is bridging finance right for me?
In a buoyant and competitive market when mortgage finance is needed in a hurry, bridging loans are highly sought after as a ‘quick fix’ by a number of borrowers. This particular type of finance can help homebuyers who need to complete the purchase of a new property before selling their existing home.
The market since Brexit has become very cautious with lenders reducing the loan to value exposure on new cases and restricting the types of security they will lend against. However, even with these restrictions in place, the bridging market is still in full swing and we are receiving regular enquiries for this type of finance on a daily basis.
By definition, bridging loans are only designed to act as a short-term solution as they typically come with a very high rate of interest and often have hefty administration fees attached. It is therefore important to proceed with extreme caution and be aware of all the facts before taking out a bridging loan.
In many cases, upon taking expert advice, many people will find that there are other preferable solutions to meet their particular needs. Although many clients will come to us to request bridging finance, we will always endeavour to explore more traditional routes. In the majority of cases, following a detailed fact-find we will often find that there is a more traditional and better value solution to their dilemma.
What are the alternatives?
Given that the cost of bridging is relatively high, many applicants who do not expect to sell quickly will be interested in a ‘let to buy’ approach. Letting the previous home provides the freedom to move to a new one without feeling pressured to sell in a hurry and therefore at a loss.
‘Let to buy’ could work for you if there is sufficient equity in your home to release funds for a deposit on a new home. You would have the lender’s permission to let out your existing property and use the income to cover the mortgage and other outgoings. An occupied property might sell better and you will then be free to take out a mortgage for your new home without the need for a bridging loan.
Who is ideally suited to taking a bridging loan?
Bridging loans are ideally suited to borrowers who are confident that they will be able to sell their property within a reasonable time-frame and have the necessary resources be they income, equity or investments to cover the repayment of capital and interest.
In today’s fast moving property market where desirable properties might be few and far between bridging finance can be the perfect solution. It is important to seek the advice of an experienced mortgage broker, as with expertise and creativity an alternative and much better value solution might be available.
For more information about sourcing bridging finance, speak to us today on 0800 980 8777