If you’re looking to buy real estate in the UK, but don’t have all the funds at your disposal, you might want to consider using bridging finance as an alternative to secured loans and mortgages. Bridging finance offers an array of benefits to those looking to buy property.
Since this type of financing is flexible, you can use it even if you have no prior experience with real estate transactions. In this article, we’ll give you all the information you need on the UK bridging finance. So you can determine whether it’s right for your situation.
Bridging Loans Are Short-Term (Typically 12 Months)
Bridging loans are short-term loans that bridge the gap between what you need now and what you will receive in the future. A UK bridging loan can help you purchase a property, consolidate debts, or finance a business start-up.
It’s a great way to cover unexpected expenses such as medical bills and car repairs. You only repay the amount you borrowed plus interest (at a fixed rate) over an agreed period. So it is much cheaper than an overdraft at your bank.
For example, if you borrow £10,000 for property investment with a bridging loan at 8% APR over 12 months this would be repaid by paying back £1216 (£10k+£800 interest). In comparison, if you were to spend £1200 on an overdraft which was charged 17% APR this would cost you £2249 in total after 12 months. So there’s no doubt about it: bridging loans have much better value.
You Don’t Have To Sell Your Property
If you are a property investor, you may be considering how best to fund your next acquisition. There are numerous ways to do this and one of the most popular is bridging finance. This is when someone lends money, typically without collateral, to assist with the purchase of another property.
This type of financing can come with several advantages over other methods. Such as it is easier to get approved and requires less paperwork. It also has a lower interest rate than some other forms of funding. You won’t have to sell your existing property either so it could work well if you plan on developing both properties at the same time.
A Bridge Loan Will Pay Off Your Existing Lender
A bridge loan is a short-term loan. People use this loan to pay off their existing lender when they’re unable to make payments. Borrowers typically use this type of financing because they have found another property that they want to buy but don’t yet have the down payment.
It’s also a good way to avoid foreclosure or repossession. Keep in mind, though, that if you stop making payments on the new property, too, it could be at risk as well. The key point is: Make sure you know what kind of financial product you need before applying for a bridging loan.
No Future Capital Repayment Obligation
UK bridging finance is ideal for property investors because it has no future capital repayment obligation. This is perfect for property investors who are looking to buy a new investment property but need to cover the initial costs of purchase before they can access their existing funds.
Once you’ve paid off the loan, your money is yours again. You don’t have to worry about any monthly repayments on top of your mortgage payments or rental obligations, freeing up more cash every month!
You won’t get saddled with high-interest debt. If you borrow from a bank, there’s always the risk that interest rates could rise and make your debt unmanageable. But this isn’t an issue with the UK bridging finance. There’s no fixed interest rate. One can make repayments when the investor sells their property.
Interest-Only Payments Are Typical
Interest-only payments are common with bridging finance. In this scenario, you make interest payments to the lender instead of paying off the full loan amount. Interest rates are low at the moment. So there’s no need to worry about your repayments ballooning in size shortly.
Additionally, interest rates may well rise at some point during the term of your bridging finance. It would be best to have a plan in place that protects against such an event. If you don’t, then it could be time to consider refinancing on more favourable terms.
Bridge Loans Aren’t Based On Credit Scores
Property investors use these loans to fill the gap between the cost of purchase and the amount they’ve been approved for. This type of financing is ideal because it doesn’t rely on traditional credit scores. So you don’t need to be pre-approved by a lender to obtain it.
The Uk bridge loan can also be drawn against at any time up until the maturity date. This means you won’t have to wait around for weeks or months before receiving your funds as with most bank loans. Bridge loans can also include other things like legal fees, stamp duty, service charges, and survey costs to speed up the process.
Avoid High Cost Of Monthly Repayments With A Bridging Loan
One can avoid the high cost of monthly repayments with a bridging loan, leaving you with more disposable income in the long term. You can use this money as you see fit, including increasing your mortgage deposit or paying off debts.
The quick turnaround time on bridging loans means one can get them within just 24 hours. With a traditional mortgage, the lending criteria and affordability assessment may take much longer than this. That’s why it’s important to start looking for a UK bridging loan lender as soon as possible so you have plenty of time to sort out all the paperwork.
The great thing about using Finance Hub bridge finance’s bridge finance service is that we give instant decisions. It means you don’t need to worry about finding an alternative provider if we turn down your application. We also offer competitive rates without any hidden fees. It makes us one of the most attractive bridge loan lenders around.
There is no better way to get a start than by giving Finance Hub a call today!