Bridging Loan Advice

When taking on certain property transactions, speed and flexibility are key. This is why so many people choose to take out bridging loans to fund these tricky property purchases.

While bridging finance is an excellent product for these purchases, they are a very specialist product that and aren’t as simple as mortgages.

For this reason, it’s important that you get specialist bridging loan advice, ideally from an experienced and reputable bridging loan broker.

Specialist advice can be the difference between securing a property in a tricky transaction, or missing our if your finance fails.

In this guide, we break down how to get the best advice on bridging loans, what they can be used for, what they cost and how to ensure you borrow safely.

Read on to find out more, or get in touch now for free impartial bridging loan advice.

What is a bridging loan?

A bridging loan is a short-term finance product that is used to ‘bridge the gap’ between two events occurring.

They are used to fund several specialist scenarios that could not be realistically financed using a mortgage.

These scenarios include funding urgent transactions, buying property at auction, buying a new property before selling your current one, financing property refurbishment or buying an unmortgageable property.

What is the best way to get advice on bridging loans?

The best way to get bridging loan advice is to use an experienced and reputable bridging loan broker, like ABC Finance.

There are many benefits of working with a bridging loan broker, with the main one being that a good broker will make your transaction far safer. This is because they will only work with reputable and fair lenders and will ensure that your exit strategy is robust enough that you will not fall into default.

Experience is key in this area, so for this reason, the best way to get advice is through a broker.

While a lender may be willing to give you advice, their advice will extend only to their own product range rather than taking a wider view of the market.

Finally, it is recommended that you avoid getting advice from forums such as Reddit or other similar sites. While the participants may be well-meaning, much of the advice given is based on perception rather than first hand experience, making it of questionable value.

This would not be an issue for minor things, but for financial matters, incorrect advice is common and can be very damaging.

A good broker should be willing to give a free initial call and will be happy to offer advice.

At ABC Finance, we don’t charge for advice, or even for arranging a bridging loan.

Read more – Bridging loan for auction property or Bridging loan for a self-build.

Key advice about bridging loans

While it’s important that we give you information on the best place to get individual advice, we also want to offer some advice in this article for those who aren’t ready to have a conversation.

Here are some key pieces of bridging loan advice that apply to borrowers:

Consider your exit strategy first – not last

Your bridging loan exit strategy is how you plan to repay the loan.

This is the most important factor of any loan and should be considered before you apply for a bridging loan.

As bridging is a short-term finance product, it has to be repaid quickly. Fail to repay the loan at the end of the term, and the security property will be at risk of repossession.

While you could always look at a refinance bridging loan, this is not an ideal option.

A robust exit strategy that can comfortably repay the loan on time is key.

Rate is important, but so is service

Borrowers instinctively understand the benefits of low bridging loan rates, there tends to be an assumption that this is the only real differentiator between lenders.

While this may be true amongst mortgage lenders to a large degree, it is far from the case for bridging.

Speed is an important point of difference, but while fast bridging loans are important in some scenarios, it may not be the most important thing in the long term.

The most important factor is aftercare. What happens once the loan is in place? Will your lender accept a part repayment? Will they work with you if something doesn’t go according to plan? Do they charge high default fees? Are there large, automatic extension fees if you hit the end of your term?

All of these factors come up constantly with borrowers and you don’t really have a way of finding this out until you’re too far in to back out.

Whether you want to work with a broker or approach lenders directly, you absolutely need to find out the answers to these questions before you commit to a lender.

Read more – Bridging loans – how much can I borrow? Or Buy to let mortgages vs bridging loans.

Have a backup plan

Things don’t always go according to plan, so don’t push your lending to the limit and always make sure you have a backup plan.

For example, if your exit is sale, is it vital that a sale occurs within 6 months at full market value or you’re stuck? If so, this is highly risky and far from guaranteed.

Are you committed to servicing interest from month 6 and have no plan on how to pay? If your exit isn’t guaranteed within 6 months, the risk is increased to a potentially unacceptable level.

If your exit is refinance, work with a broker who will also handle the exit

We speak to a lot of clients whose exit strategy is to refinance the security property. The issue is that their bridging loan was arranged by a broker who doesn’t also arrange long-term finance.

They come to us looking for a mortgage that isn’t possible but to poor advice from a broker who was never going to be around to deal with the fallout.

At ABC Finance, we stick with you from initial enquiry through to the point where you don’t need us again. We see it through.

This is vitally important as we don’t trap ourselves or you in a position that we won’t get out of. This means we think beyond the current finance application and consider your long term financial health at all times.