What will a bridging loan cost?
THE QUESTION
I am considering the use of a bridging loan and would like to know:
- What are the typical fees?
- Over what time period can you get a loan?
- How quick is the approval process?
- Who provides the most competitive rates and lowest fees?
THE ANSWER
There are a number of bridging lenders and the criteria vary from lender to lender depending on your particular circumstances and the questions you ask. It is a bit like asking:
- How much does a car cost?
- What is the size of the engine?
- How fuel efficient is it?
... and so on
Of course, the answers will depend on what model of car you buy. So the answer to your bridging finance questions depend on the property you want to buy, what you intend to do with it and your current situation. There are a few basic facts that will give you a ballpark view:
- Almost every bridger charges a set-up fee, often 2%, but not always.
- Monthly fees vary for a host of different reasons - location, property type, size of loan to name a few, but the variance is likely to be between 0.45% and 2%.
- Exit fees are not always charged, but some bridgers do charge them and you need to check this out before agreeing to the contract.
- You will pay for a survey and also for the lenders legal costs.
- The term of the loan is your choice. Some bridgers will do 1 month minimum up to 9 months; some even longer than that. Other bridgers have a 3 month minimum loan period.
- The loan can be set up in days, but it may take longer to complete the legal work. How quickly that is done will, mostly , be determined by your choice of solicitor.
- No single lender provides the best of everything on any deal.
- There is a plethora of minimum loan thresholds, each bridger sets their own and it can be anything from £25k to £250k
- If you intend to refinance into a BTL mortgage, it would be prudent to take an 8 month term, no less, assuming the lenders you want to use make you wait 6 months.
Trying to source the right bridger for your deal blind will be a massive task. Better to choose a bridging broker to match the lender to your deal. Their knowledge could save you a lot of money getting it wrong.
If you need to discuss your specific project, give our brokerage a call on 01206 586586 and we'll be happy to help.
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