Bridging loan finance may be different but there are some things they have in common:
- They are used to cover a short-term financial gap or fund an investment or a purchase.
- Interest is charged on a monthly basis after the purchase or project goes ahead as expected.
- After about 6-12 months, the bridging loan is paid in full - usually, after the property that the loan was used to buy has been sold.
To get a good deal on bridging loan finance, a borrower needs to have a concrete exit strategy. This refers to the plan the borrower has for repaying the outstanding balance including the borrowing costs in a lump-sum payment.
What if you want to hold onto the asset or property you purchased with the bridging loan? Is it possible for a person who has borrowed a bridging loan to retain the property they bought with the loan rather than sell it? Consider an option for instant loans for bad credit.
Refinancing Vs. Bridge-To-Term Loans
As a bridging loan customer, you can consider these 2 options to retain your asset after completing the loan term:
- Refinancing the bridging loan by transitioning it to a longer-term agreement like a specialist buy-to-let property loan or commercial mortgage.
- Taking out a bridge-to-term loan in the first place as doing this will transition to a longer-term facility with the same lender.
Even though these options give the same outcome, bridge-to-term loans have many benefits to offer:
First of all, a bridge-to-term loan keeps admin and paperwork to the bare minimum. Since the first bridging loan and the longer-term loan issued after the initial loan are issued by the same lender, you will not have to switch providers when you are about to complete the first loan term.
Secondly, sticking with one lender for the two loans can help you reduce borrowing costs. Why? Remember that when you take a loan, you will have to pay standard fees and charges like arrangement fees, admin fees, processing bridging loan fees, transaction fees, valuation fees and so on. However, when you take a bridge-to-term, you will pay these fees and charges once. On the other hand, if you choose another provider for the second loan, you will have to pay these fees and charges again.
Independent Broker Support
Since all lenders don’t offer bridge-to-term products, it is important to seek help from an experienced broker before applying for your loan. Apart from helping you find a good lender who will meet your needs, your broker will negotiate on your behalf to ensure that you get a good deal.
A good broker will tell you about your obligations and entitlements, in case your circumstances change along the way. It is possible to pay your bridging loan in full at an early date to reduce borrowing costs. So, take your time when looking for a broker so that you can find one who will help you do the things we have just mentioned in the best way possible.
