Traditional mortgage options may not always be in sync with your timeline and finances, especially if you need to buy a property before you have sold an existing one.
This is where bridging loans can be helpful, offering a fast and flexible way of raising funds for a short period.
We look at the pros and cons of bridging finance to help you make an informed decision about whether this is the best option for you.
In many cases, bridging loans can be arranged quickly, offering a faster way to access funds compared to a traditional remortgage. This can be especially helpful if you are working to a tight deadline. For example, if you need to continue refurbishing a property or want to break free from a property chain.
y interest payments.
If you are the owner of a non-habitable or partially built property, you may find it difficult to secure funding from a traditional mortgage provider. Bridging lenders could be more willing to consider these types of properties, as the loan will be directly tied to the house/building the funds are being used for.
Let the Willows team know more about your current situation and we’ll help you determine if your property is likely to be accepted as security by a bridging lender.
In most cases, if you prefer to pay for the loan at the end of the term or if the exit strategy doesn’t involve refinancing, proof of income is not a requirement. Instead, lenders will want to ensure you have a strong exit strategy in place, which will give them assurance that the debt will be repaid in full once the term ends.
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With a bridging loan, the loan amount is split into two figures: gross loan and net loan. The gross loan is the total amount you will need to repay, including interest and fees. The net loan is the amount sent to your bank account to use, minus the interest and fees. That’s because the interest is ‘rolled up’ for full payment at the end of the term, so you do not have to make any monthly payments.
Bridging lenders are generally open to accepting applications from borrowers with an adverse credit history.
These tend to be lenders that have experience processing applications from people with less than perfect credit scores. To improve your chances of securing a bridging loan in these circumstances, ensuring you have a solid exit strategy in place is a must.
If you have an adverse credit history, the Willows team can explain more about how this works and if there are any specialist lenders that may be able to help.
Because bridging loan lenders are less likely to ask you to provide proof of income, this also means that your employment status is not of primary importance.
Your exit strategy is the main focus for most lenders, as they need to be reassured that you will have the finances in place to repay the gross loan at the end of the term.
Unlike secured loans, there is no strict maximum age limit imposed by most bridging lenders. Proof of income and employment are not requirements, which also means your retirement status is generally not taken into consideration.
Some lenders may ask applicants that are over a certain age (which is set by the lender themselves) to sign their loan offer in the presence of a solicitor, for added security.
Bridging finance can offer solutions for complex scenarios, such as avoiding bankruptcy, preventing home repossession, or addressing inheritance tax issues.
At Willows, we work with experienced lenders that specialise in helping borrowers to find the best deal to suit their individual circumstances.
Bridging loans offer a fast and convenient way to secure funding for a variety of projects. Because they generally last between 3-12 months, the short-term nature of their structure means that interest rates are typically higher than traditional mortgage products.
The Willows team can give you an initial assessment of your finances for a bridging loan, so you have a better understanding of your chances of success.
In most cases, bridging loan lenders limit the term to 12 months, which means the full debt must be repaid once that time has elapsed.
There are some specialist lenders that may offer terms up to 18 months, but this is done purely at their discretion, as decisions are made on a case-by-case basis.
In addition to higher interest rates, lender rates for bridging fees also tend to be higher. This is due to the short-term nature of these types of loans, which means lenders have less time to recover their return compared to traditional mortgages.
Bridging loans often come with lower LTV ratios than standard mortgages. The maximum LTV offered will depend on the lender’s criteria, which they will determine as they process an application.
As a general rule, LTVs are usually capped at 75%, although there can be instances where a lender offers a higher rate.
When calculating your bridging loan, remember that the net loan (which is the total amount of money sent to your bank account) will be lower than the gross loan figure. This is because the interest for the entire loan is usually deducted upfront, along with any fees, so the money you receive may be lower than anticipated.
Speak with a member of the Willows team who will be happy to explain how this works, so you can calculate and plan the finances you need for your property.
As is the case with all secured borrowing, your property is at risk of repossession if you are unable to repay the debt. The short-term nature of a bridging loan can increase this risk.
However, a strong and realistic exit strategy can also reduce it. Repossession is usually a last resort for many lenders, although it is a risk that you should still be aware of.
Taking out a bridging loan is a big financial commitment, so it’s important to know the advantages and disadvantages involved.
On the plus side, these types of loans are fast, flexible and do not require you to make monthly payments. On the other hand, interest rates and fees are higher than traditional mortgages and there is also a risk of repossession if you are unable to repay the funds.
You can speak with the Willows team to discuss your options, and we’ll answer all your questions to help you make a decision that works for you.
Call us on 01656 766 158 to find out more.
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We’re extremely proud to be rated ‘Excellent’ for our service standards year after year. Since 2008 we’ve helped thousands of customers across the UK to find the right finance for their needs – no matter how complicated the circumstances.
At Willows Finance we ensure your personal information is kept secure and confidential.
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At Willows Finance Ltd, we appreciate that your privacy is extremely important to you. With this in mind, we have put in place a number of measures to ensure that any personal details we obtain from you as a result of visiting this website is processed and maintained in accordance with accepted principles of good information handling and also in accordance with the Data Protection Act 1988.
This statement provides you with details of the type of information we may hold about you, how we obtain and use information and how we protect your privacy.
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
We offer first and second charge regulated mortgage contracts for business or personal use.
Other finance options may include:
Regulatory Status:
We offer an advised mortgage broking service and provide enough information for you to make an informed decision.
We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
You can view our privacy policy at: https://willowsfinance.co.uk/privacy-cookie-policy/.
Lenders may also have their own privacy policies which will be provided to you.
We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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