Choose which type of UK bridging loan works best for you
There are two kinds of bridging loan, each used for a distinct purpose.
Open bridging loans, UK
Buyers take out an open bridging loan when they’ve found the house they want to buy, but haven’t exchanged contracts. You can usually only apply for this type of bridging loan if you have a healthy amount of equity in your home. Bear in mind that the loan provider will want a lot of details from you before they’ll agree it. So be prepared in case you have to act fast. Your bridging loan provider will want to check:
• The mortgage offer on your new property
• The details of the property you’re buying
• Proof that your own home is being marketed actively
• Details about how you will manage your loan repayments
• Your plans if your sale falls through
Most providers insist on a 12 month ceiling for open bridge loans, after which they’ll probably be keen to renegotiate the deal.
Closed bridging loans, UK
Homeowners can only take out a closed bridging loan if they’ve exchanged contracts on their home. Because the risk is less with this kind of UK bridging loan, with very few sales collapsing after exchange, providers are much happier to offer closed loans.
Bridging loans UK – where and how
Bridging loans are offered by:
• specialist lenders Specialist lenders can usually act much faster than banks, often getting everything sorted online within a week. But you pay through the nose with even higher interest rates.
• Once you agree to the loan deal, your lender will arrange a valuation for the property on which the loan will be secured. They’ll usually be with you within 72 hours of your fee being paid
• Valuation costs vary but £200 is about average
• You get your solicitor to move immediately on the conveyancing; local authority searches, checking the deeds etcetera
• You should get the money within 7-10 days, but this can be speeded up provided everything goes smoothly
• For bridging loans, UK providers will charge a special interest rate, a ‘percentage per month’. Here’s an example: you’ve borrowed £200,000 at 1.5% a month. Your loan will cost 1.5% of £200,000 every month, that’s a monthly repayment of £3000.