Unfamiliar With Bridging Loans?
Here are our two most frequently asked questions about these types of loans:
Why do borrowers choose bridging finance?
Borrowers choose bridging finance for a variety of reasons. We have listed some below:
- Speed of funds – bridging loans can be up to 12 weeks quicker to complete than a conventional mortgage. This can assist the borrower in a number of ways such as:
a) 28 day exchange/completion for an auction purchase.
b) Maximising a business opportunity
c) Repayment of a tax bill
d) The renovation and sale of an investment property
- Mortgage criteria – most mortgages are based on income multiples, however as all of the costs of a standard bridging loan are deducted from the gross advance there is much less emphasis on how much the borrower earns.
- Credit profile – if a borrower has a poor credit history they are unlikely to obtain a standard mortgage. Where a borrower is looking to repay a bridging loan via the sale of the security the credit profile of a client has less impact.
- Where funds are only required for a short period of time, typically 6 to 12 months.
What happens if the borrower defaults?
If the borrower fails to repay we would enforce the legal charge and take possession of the security. We would look to sell the property to recover any monies owed plus interest and default sums. To ensure the security is adequate the Loan to Value is always 75% or below calculated on the loan plus interest to reduce the risk of capital losses.