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Bridging Loans Overview

Borrowers are now using Bridging Loans to cover timing differences in pursuit of their Return on Investment objectives. This type of borrowing can provide a realistic mechanism to exploit property purchase discounts such as purchasing through Property Auctions and Off-Plan new builds. Bridging is now seen as a way of enabling the buyer of property to affectively transact as a cash buyer of property.

A Bridging Loan can be a very effective means of raising fast short term finance, enabling a beneficial property transaction to complete which would otherwise be lost. However, Bridging Loans remain a more expensive way of borrowing than standard mortgages. A Bridging Loan should only be used when it can be repaid or refinanced within a relatively short timescale. Interest rates and fees vary widely depending upon the lending institution, your circumstances and type of Bridging/Property you are looking to obtain. As a guide interest rates range between 6.50% and 18% per annum – You can obtain a rough guide to the costs by using our instant payment calculator Lagoon Bridging Loan Quote and Calculator

Bridging Loan Lenders invariably charge an arrangement fee. These fees can usually be added to the loan so avoiding any out-of-pocket expenses. As with interest rates arrangement fees can vary widely ranging from 0.5% to 1.5% of the loan amount. These fees are often negotiable so you should be prepared to haggle. You often find that Bridging Loan lenders who charge fees at the lower end of the scale offset this by charging higher interest rates.

Deciding whether to go for a lower rate of interest or a lower arrangement fee depends on your circumstances. If you are confident that you can pay the Bridging Loan off quickly (either through a property sale or by refinancing with a standard mortgage) then it is often more preferable to choose a Bridging Loan with a lower arrangement fee and a higher interest rate. If however you expect the Bridging Loan to be in place for a number of months, then you may wish to consider a higher arrangement fee in combination with a lower interest rate as the arrangement fee becomes a smaller part of the overall cost.