Bridge Loans

A bridge loan is a great solution for short-term borrowing. You might hear the terms bridging loan, interim financing, or swing loan—all of which mean the same thing.

Overview of Bridge Loans

The most common use for a bridge loan is one that’s taken out for a short period to “bridge the gap” in your finances to purchase a new home before selling your current one. For example, your buyer drops out of the sale at the last minute, and you don’t want to miss out on your dream home.

However, this isn’t the only reason for taking out a bridge loan. We regularly approve them for a wide variety of scenarios, such as:

  • Mortgage delays: Rather than losing out on a property because of red tape, a bridge loan can cover the cost until the longer-term financing is approved.
  • Mortgage refusal: If your mortgage application has been declined, a bridge loan can help you to build your credit rating and then reapply for a conventional mortgage at the appropriate time.
  • Buying and upgrading a dilapidated property: It can be tough to secure a conventional mortgage on a property that’s considered dilapidated. For example, it has no plumbing, toilet, kitchen, or bathroom facilities. A bridging loan can be put in place while the work is carried out and you can then take out a longer-term deal.
  • Developments and renovations: Either for your existing property before selling or building an additional house or houses on your land.
  • Buying an auction property: perhaps you’ve been fortunate enough to bag a bargain and need to secure the long-term finance to cover it. A bridge loan allows you to benefit from such an investment opportunity while you wait for the longer process of getting a conventional mortgage.
  • Short-term business cash-flow issues: SMEs often have to deal with curveballs that stifle cash flow. Our bridge loans can be the perfect short-term solution.

How Bridge Loans Work

We typically secure a bridge loan on the equity in your property or business. This is termed a “charge” and, depending on circumstances, there are first and second charges. These refer to the order in which repayments will be made to us and any other lender should you be unable to repay the loan. If you have an existing mortgage, that will be the first charge and the bridge loan will be the second. While this sounds scary, it’s a legal agreement that has to be taken out for a bridge loan to be approved.

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We’ll determine the interest rate, which can be fixed or variable—whichever you prefer. Many people choose to go for the latter, as a bridge loan is typically only for a few months. Fixed rates are available if you prefer, although the interest rate will be a little higher.

You’ll also be able to decide whether to take out an “open bridge loan” or a “closed bridge loan”. The former doesn’t have a fixed end date (although it’s generally assumed that it will be completed within a year). The latter has a fixed date for completion. We’ll discuss your options when we go through the application process.

Pros and Cons of Bridge Loans

The pros of a bridge loan include:

  • Speed: Approval is much faster than conventional lending. We can close an agreement in as little as 14 days.
  • Defer payments: Until an agreed date at the end of the loan.
  • Flexibility: We can offer flexible repayment plans according to your circumstances.

Cons include:

  • Interest rates are higher than long-term lending options.
  • There are fees associated with this kind of borrowing.
  • The loan is secured through an asset—usually the equity in your home. Therefore, you should ensure that you’re in a position to repay the bridging loan as your home is at risk if not.

Applying for a Bridge Loan

BRRR Loans have simplified the application process, making it as easy as possible to access funds at short notice. As a responsible lender, we ensure that a bridge loan is an apt solution for your situation. Because the loan is secured on existing equity only, there’s no need to fill in complex documentation or prove income verification.

We’ll speed through the necessary checks, advise you of our impressive industry-low interest rates and fees, and voila! The cash will be available for you before you know it…

How does a bridge loan differ from a conventional property loan?
What’s the difference between a bridge loan and bridge financing?
Are bridging loans expensive?
Do I need a good credit score for a bridge loan?
Can I use a bridge loan to finance a flip?
What type of property can I use a bridging loan for?
How long does it take for the funds to become available?