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Bridging loans are a short-term financing option for those wanting to purchase something while waiting for the funds to become available. This is commonly used for property sales. A borrower would use a bridging loan to ‘bridge the gap’ between purchasing a property and repaying the loan from selling an existing property.
They can be useful for securing below-marketing value properties and guaranteeing a quick sale. In the buy-to-let world, an investor can use these loans to renovate the property and repay the loan through rental income. Other uses can be to renovate and refinance a property that did not previously qualify for a mortgage, and being a perfect middle-ground between cash buying and a traditional mortgage.
Details of the process and costs can be found here.
Bridging Loan Rates UK
Bridging loans are often seen as expensive, and people avoid them for such. This is partly due to their interest rates. Bridging loan rates in the UK can reach up to 1%. While this may seem a small percentage compared to current traditional mortgage rates, the quick and short-term nature of UK bridging loans makes their interest rates higher in cost.
There are three ways that UK bridging loans can charge their interest rates:
Bridging loans remain flexible and are a beneficial option for quick financings. It is the bridging loan interest rates that put people off. However, there are ways to make rates lower.
Research or seeking professional guidance is certainly key. Bridging loans, or any loan, depends on an individual’s circumstances. CityRise does not offer financial advice, but we work with expert partners who can. Do not let uncertainty halt your property investment journey. Schedule a call with one of our property consultants to discuss your options!
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