Bridging finance could save your dream
Bridging Finance in Birmingham is often taken out where funding is required at short notice, for example, buying a property at auction. However, a bridging finance mortgage has many other uses, the most common bridging finance solutions being:
Purchase one property before completion on the sale of another by utilising a bridging mortgage.- Fund the purchase of a property in need of refurbishment and possibly un-mortgagable in its current condition. The property would then be re-financed onto a normal mortgage after the improvements have been completed.
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The list of possible uses is virtually endless, but they often have two elements in common; they are required at short notice and for a short period of time.
A Bridging loan can be either on an “open”(1) or “closed”(2) bridging basis. RM Mortgage Solutions have the resources to arrange bridging loans that will meet your needs, whilst we can also arrange the longer-term funding to replace the bridging loan once the purchase is complete.
If you are a first-time buyer and / or lack experience with mortgages then a bridging loan may not be the right option for you. However, every case is individual so why not call us to discuss your options.
(1) An “open” bridging loan requires no pre-arranged exit strategy with the lender.
(2) A “closed” bridging loan is where there is a guaranteed exit strategy. The rates for a “closed” bridging loan are usually lower than for an “open” bridge due to the lower risk for the lender.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Please Note: Some forms of Bridging Finance are not regulated by the Financial Conduct Authority.
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The difference between open and closed bridging loan types is when the exit strategy comes into effect.
Put simply, an open bridge is an open-ended loan which doesn’t have a set repayment period. This means you can decide how much to pay off and when. You’ll still need an exit strategy, but just not a set date to repay the loan.
With a closed bridging loan though, the lender will set a final date on which to pay off the loan. This means that with a closed bridging loan, you’ll need to be satisfied that your exit strategy is realistic and achievable.
For example, if you’re looking to exit via the sale of the property, you’ll need to have the completion date set before the date of the final loan payment.
Pros and cons
Cost. An open-ended bridging loan tends to have higher interest rates because the risk to the lender is greater. Therefore, it can be more costly, especially if the loan period continues over a greater length of time.
Penalty fees. As an open bridging loan has no final date, there are generally no penalties for not meeting the deadline. With a closed bridging loan, if you don’t pay back the remainder on the agreed date you could be faced with a penalty fee.
Flexibility. Open bridging loans provide a lot more flexibility. For example, if you don’t have a set completion date from the buyer of the property you’re using to pay off the loan, an open bridging loan could be the better option.
Unusual circumstances. If you don’t have a set income, or for some reason the timescales of your transaction are unusual, then an open bridging loan could be an option.
