Considering many new houses are being built every year, it only makes sense that some people will want to get their hands on one. Whether it’s through an auction or not, one thing is sure – when you find a good deal for one of these houses, you need cash, before the offer goes away or someone else seizes the opportunity.
Where can you get this cash, in any case? From the best bridging loans, of course! But even with bridging loans, you need to find the right provider if you don’t want to be worried about your repayments. How can you find the right bridging loan provider? Read on for more details.
What to Consider When Looking for a Bridging Loan Provider?
So, you might be asking yourself how to get a bridging loan. In this respect, one of the most important aspects is the provider you will choose. Not all lenders will be the same, but it’s essential to shop around and find one that meets your needs. That being said, here are some things to take into account when looking for a bridging loan provider.
You cannot overlook the experience aspect, especially if you want to make sure you will work with someone who knows what they’re doing. Otherwise, the simplest mistake could ruin everything for you. Not to mention that an inexperienced lender may not only take longer to finish your application process but may also forget many essential details when looking over your documentation. Of course, that doesn’t mean that every newer lender is terrible, but in general, it’s good to look for someone who’s dealt with some bridging loan experience.
Therefore, when browsing for a bridging loan lender, look for someone who is known to have offered various bridging loans in the past and has enough knowledge on the matter.
· Fast Service
Let’s be fair, would you like to wait longer than needed to get your bridging loan? The house you’ve set your eyes upon at the auction might be taken from you at any given moment. You cannot afford to waste time, which is why your bridging loan provider needs to be someone who works quickly and efficiently.
In general, bridging loan providers should give you an initial quote inquiry reply within 24 hours. Other than that, they should be able to look over your documents and go through every step as fast as possible. If you need money for a new house very quickly, the speed of the services is an important aspect to consider.
· Type of Lender
Bridging loans can be obtained from banks – which used to be a prevalent option when people needed loans for either a refurbishment or a move. So, you can turn to banks in some instances. But not all banks will be willing to give these loans, which is why it’s essential to consider other options, such as commercial bridge loan lenders. They will make sure to provide you with a secure, quick loan handled professionally.
· Interest Rates
You have to consider how the lenders rate their bridging loans before settling for them. Since bridging loans are short-term loans, they will have higher rates compared to your typical mortgages. At the same time, it’s vital to find rates as convenient for your situation as possible.
· Use a Mortgage Broker’s Help
Considering people usually only take out a bridging loan once in a lifetime, many don’t consider using a mortgage advisor. But you have to use one if you want to make sure you choose the right loan provider. They have much experience when it comes to bridging financing so that they will offer you the necessary advice.
The cool thing is that you can even find mortgage brokers that specialise in finding property finance for particular borrowers. Therefore, you can find a mortgage broker that will direct you towards the right loan provider.
What Will a Bridging Loan Provider Look at Before Offering You the Loan?
Applying for a bridging loan means that you take the responsibility of making regular payments. At the same time, you agree to take a series of steps that help you obtain the loan. Getting a bridging loan is a whole process, one that you need to know about before you contact the loan provider. The lender must make sure that you are trustworthy before making a decision. So, here are some things a loan provider will take into account during the process:
· Address and ID Evidence
Of course, you have to bring a proper document that serves as proof of your ID and address. More often than not, this happens by either showing a driving license or a passport.
· Credit Profile
If you want to make sure you get an excellent bridging loan rate, then you must have a good credit profile. Meanwhile, if there’s any adverse information in your profile, your loan rate may not be as you want it to be.
· Experience with Properties
Just like you want your lender to be someone with experience in the field, you need to be someone who has proper experience in dealing with properties. Still, this doesn’t mean that a lack of experience will stop you from getting a loan. It will just make your chosen provider look at your proposal more carefully – he will also consider other important details when making the decision.
· Valuation Report
A valuation report is critical because it will offer more information about the asset or property you intend to secure to the bridging loan. Its overall value is what’s important. But since the loan provider would have to take your words with a grain of salt when you tell them the value, they will usually have an experienced valuer analysing the property. A report will be carried out, deciding if the value of the property is a good one. Conversely, in case you have some other assets aside from the property you are buying, you may have to pay for the additional valuation reports.
· Your Deposit Size
You need to make sure you have a large deposit. This may convince the lender that maybe you are worth the risk. Besides, this might help you get a better interest rate as well.
· Exit Strategy Information
Another thing that will matter to the bridging loan provider is your exit strategy. Depending on what your chosen plan is, you will have to provide proof that your cash will be available within a certain amount of time for repayment.
· Income Proof
You have to pay off the loan, after all, and if you don’t have a stable income, you may not be able to obtain the desired bridging loan. This is why you have to provide evidence of income, so you can show that you can deal with any unexpected costs.
How Much Does a Bridging Loan Cost?
It’s hard to estimate an overall cost for bridging loans because fees and rates depend on the particular lender. Each one of them has different rates – not to mention that your situation will also be decisive when it comes to how much you will be charged.
Although the amount you can borrow may vary depending on several factors, one thing is sure – you can borrow between £5,000 and £250 million. In general, there is a maximum loan to value too, which is between 65% and 80%.
In addition, there are several fees charged when you take out a bridging loan. You have the arrangement or facility fees that are about 1-2% of the balance. Next, there are the exit fees that are 1% of the balance if you repay it early enough. However, the latter is not charged by all lenders. Legal fees will be charged too, as well as introducer or broker fees, and valuation fees. Lastly, administration or repayment fees will have to be dealt with as well. So, remember to take all of these into consideration.
If you were wondering “How much is a bridging loan?”, you should also know that this is not an exhaustive list of what fees you will have to deal with. You should talk to the lender first and see if you’ll be able to afford the repayment or not.
So, the answer to the question “How much does a bridging loan cost?” depends on the lender you work with. That’s why you must find the right loan provider for your needs. As you can see, costs vary depending on your lender, as well as your income, credit history, and more.
If you want to make the best out of your bridging loan, finding the right loan provider is a must. You have to consider the interest rates they charge on average, as well as their experience with bridging loans and how quick their services are. Hopefully, you will now be able to pick a good loan provider – if not by yourself, at least with the help of a mortgage broker.