BRIDGING FINANCE

Most commonly, bridging loans are used in real estate for:

• Quick property purchases that may otherwise not be possible.
• Buying a property at auction.
• Funding the purchase of a new home while awaiting the sale of your current property.
• Immediate cash needs for property redevelopment or refurbishment.

Here's a simple breakdown:

1. You take out a bridging loan to finance the purchase of a new property.
2. Ideally, you sell your current property quickly.
3. You use the proceeds from the sale to pay off the bridging loan.

The loan can be 'open' or 'closed':

• A closed bridge is when you have a set date to pay off the loan.
• An open bridge has no fixed pay-off date but is usually settled within a year.

Bridging loans typically have higher interest rates than traditional mortgages because they are short-term and considered riskier by lenders. Costs include:

• Interest rates charged monthly, rather than annually.
• Administration and legal fees.
• Potential appraisal or advisory fees.

It's important to consider all these costs when determining the affordability of a bridging loan.

Bridging loans can often be arranged quicker than a mortgage—sometimes within a few days. This speed can be advantageous if funds are required urgently, like in an auction purchase.

To compare bridging finance effectively:

• Look at the APRC (Annual Percentage Rate of Charge) to understand the overall cost for comparison.
• Consider any additional fees charged by the lender.
• Evaluate the terms of the financing, such as loan duration and flexible repayment options.

To save money:

• Shop around to find competitive interest rates and lower fees.
• Opt for a closed bridging loan if you're confident about when you can repay.
• Ensure you have a solid exit strategy to pay off the loan promptly, thus reducing the interest costs.

When choosing a bridging lender, consider:

• Reputation and trustworthiness.
• Transparency of fees and costs.
• The flexibility of loan terms.
• Speed of transaction completion.
• Customer service quality and support.

Remember, as with any financial commitment, it's advisable to consult with a financial advisor or specialist broker to find the best deal suited to your circumstances. Bridging finance can be a practical solution, but it's crucial to enter the agreement with a clear understanding of all terms and conditions.