- Finding the best deal is a great time investment, it could save you thousands.
- Consider how a lenders service standards fit with your needs – is speed or cost more important? Can you have it all?
- Your exit strategy is the thing that keeps you safe. Don’t be tempted to neglect it.
Before talking to an expert about your requirements for bridging finance, there are a few other factors to consider. Essentially, bridging loans are designed to be a route to raise money quickly and, as such, should be thought over carefully. While there are a number of benefits of bridging loans, it’s important that you consider your exit strategy before applying.
What to think about before applying for bridging finance
Consider these 3 points before applying for your bridging loan:
1. Understand what is available & any related fees
When looking to take out a bridging loan, especially for the first time, it is important that you understand how the loan works and what your likely bridging loan costs are. You can do this by using our free bridging loan comparison tool to compare rates and fees based on your circumstances.
Simply looking online isn’t always the best approach. Most people advertise ‘rates from’ and the rate provided usually isn’t available to the majority of borrowers. As such, working out which provider will give you the best deal is often almost impossible without using a broker, or speaking to multiple lenders.
The difference in cost between lenders can be significant, often meaning thousands of pounds difference in your loan cost. Equally, service standards between lenders can vary greatly too. If you want a loan to complete in 5 days, then a lender who takes 3 weeks on average will likely let you down.
If your situation is complex, talk to one of our bridging loan experts before applying. Our experience and knowledge of the market will help you to find the best deal quickly and understand how the loan will work and what is expected of you.
2. Consider how you will repay your bridging loan before taking it out
- Sale of the property.
- Refinance to longer-term debt.
- Money that is due to you but has not yet been received.
Due to the short term of borrowing and the fact bridging loan rates can be high in comparison to other, longer-term types of lending, it is important you can prove your ability to pay to loan off. Whether you are looking to refinance onto a cheaper form of debt, sell the property or anticipate money coming to you, it is important you are as sure as possible of the timescales.
When selecting the term of your bridging loan, it is easy to go for the shortest possible time frame in an attempt to reduce the amount of interest paid or maximise the net loan. If the loan term ends and you are unable to repay your bridging loan back as agreed, you will be in default of the loan and may well be penalised financially.
It is advised that, when banking on the sale of a property, you are cautious. Delays are common and, in this situation, you could miss the loan’s end date through no fault of your own.
The same can be said about refinancing, or money that is due to be paid to you is the planned repayment method. Again, these can be delayed and cause issues.
If you choose to take the refinance route, ensure the application you intend on submitting is realistic and likely to succeed. If you’re confident that this is the case, lenders will be able to give you an initial indication of their intention to lend. By taking this step, you will reduce the risk of failing to repay your bridging finance.
3. Choosing the right solicitor
Picking the right solicitor is crucial to ensuring the loan completes on time and without issue. A solicitor who is experienced in dealing with bridging loans will ensure the legal process runs smoothly and quickly. In fact, a good solicitor will be a key factor in how long it takes to get a bridge loan.
Your solicitor will act as the sole liaison between the lender and yourself when it comes to your understanding of the legal terms of the loan. With this in mind, it is advisable that your solicitor is well versed in dealing with bridging loans.
As bridging is a very specialist subject, and most borrowers don’t take them out regularly, surrounding yourself with an experienced team can only pay dividends for you.