How to find the best bridging loan?

Comparing Rates: How To Find The Best Bridging Loan

Before deciding on a particular lender, you need to consider other factors – it may prove detrimental to jump head-first into a seemingly cost-effective bridging loan without first considering options.

There are other considerations to be made when solidifying your plan of action, and for this reason, it is beneficial to first seek out the advice of a specialist broker - without help, you may miss out on the best deals.

When comparing bridging loans, what should you consider?

To sufficiently compare rates, you must bear in mind several questions:

• What type of loan do you need? – This will depend on your intended purpose for a short-term loan. For example, residential property will fall under regulation by the Financial Conduct Authority (FCA). If you’re looking to finance the purchase of a new home, you will likely want to secure a regulated loan. In contrast, unregulated loans are commercial bridging loans for property development, investment or commercial ventures such as buy-to-let property.

• How much do you need to borrow, and how much can you get? – You can borrow based on the lender's loan-to-value (LTV), which is calculated by dividing your loan amount by the home's value. Typically, bridging loans begin at £25,000 and can go as high as £250 million. The amount offered will always depend on a lender's criteria, the security provided and the property's value.

• How quickly do you need the money? – The primary benefit of a bridging loan is its speed; it can often be arranged within days of application. This allows you to act on a property purchase or get a development project underway. However, without specialist help, the process could take more time than you have.

• What is the minimum/maximum loan period? - Short-term finance usually spans a 12-month term but can be shortened or lengthened depending on your needs. 

• Should you consider a specialist broker? – It can be challenging to approach lenders directly or find a suitable lender for your circumstance without specialist help. Brokers can guide you through the process, work through your interests, and aid in finding the best bridging loan for your situation.

How much does a bridging loan cost?

Interest rates are more expensive than traditional finance because of the short-term nature of borrowing.

The Bank of England base rate often influences the rates on bridging loans, which typically range between 0.39% and 1.5% per month – although this would be subject to a lender’s criteria.

Using a bridge loan calculator will give you a good idea of how much you can expect to pay. Again, specialist brokers' help can be beneficial here, as an initial quote may not entirely reflect the best bridging loan we can secure for you. 

Rates vary between lenders

The interest rate can be affected by lenders and will reflect your individual case – lenders will consider several key points when determining the risk factor.

• Whether you have a realistic exit strategy to pay back the loan.

• The type of property offered as security.

• Factors that may inhibit a property's sale – location and how quickly it is likely to sell.

• How long the loan period will be.

Are there additional costs?

Additional fees can vary – different costs can be involved depending on the case. However, in most cases, you must factor in these fees to the overall cost of a bridging loan:

Arrangement fee - lenders require a fee for organising the loan, usually calculated at 2%.

Legal fees – You need legal representation for property transactions; the cost can vary depending on complexity and the solicitors involved. 

Valuation fee – lenders will appraise your property and determine the LTV; this can be made cheaper through a desktop/drive-by valuation if time is of the essence. 

Broker fee – Brokers require payment for services in arranging the finance and getting your case to a suitable lender.

We can take your case to a specialist lender and find the best deal for you 

When time is a factor, you want the quickest solution through experienced brokers that can bring your case to the appropriate lender.

Our team can aid you in comparing options, answer any questions you may have, and secure you the best deal to suit your circumstance.