You can apply for a bridge loan when you need funds for a brief period. Bridging finance can equip you to acquire a new property while waiting on your present one to sell. This article will highlight bridge loans and why certain people should opt for them.
Types Of Bridging Loans
The most popular forms of bridging loans are open and closed.
Closed Bridging Loans
These are short-term loans whose exit strategy is determined from the onset. Consequently, your lender knows how you will pay back your loan at the end of your term. You must repay your debts as per loan term if you borrow a closed bridging loan. You will likely receive a closed bridging loan while awaiting your property sale despite exchanging contracts.
Open Bridging Loans
Open bridging loans are short-term loans with no defined repayment date. Still, you will have to repay your debt within one year even though there isn’t a set repayment date. Lenders often want proof of a practical repayment strategy before offering you an open bridging loan. This proof can be whether you can sell equity from a property or take out a mortgage. Furthermore, your lender will want proof of your acquiring property and how much you want to pay. You may also need to present the practical steps you are taking to locate a buyer for your present property.
First And Second-Charge Bridge Loans
A thorough assessment of your property will be carried out, and a charge will be put on it when you go in for a bridging loan. This charge is a binding agreement establishing which lenders will get their money back first if you cannot repay what you owe. If you default on your loan, your property will be taken as collateral by a first and second charge bridging loan. If you have a property mortgage already, your bridging loan becomes a second charge loan. You will pay your mortgage before the loan if you miss payments and must sell your property to repay your debts. However, you will receive a first charge bridging loan if the property was yours or you were repaying your mortgage with residential bridging finance.
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Borrowing With Bridge Loans
You can get £25,000 – £25 million in cash from lenders and finance brokers like Finbri. If you obtain a first-charge loan, it is possible to take out more than if you borrowed a second charge loan.
Alternatives
You can consider a let-to-buy mortgage deal if you wish to relocate without selling your property. You can accomplish this by remortgaging your current property and acquiring a new one with the equity you free up.
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