Tips For Choosing Best Mortgage Bridging Loan Provider
- Jimmie Baillie
- Nov 14, 2024
- 3 min read
Introduction
Mortgage bridging loans enable borrowers the access to quick, easy finance, especially when assisted by a mortgage broker. However, given the wide array of bridging loan products and providers it can be difficult to ensure you are accessing the best option. In this way, a mortgage broker’s assistance can prove invaluable.
In this article we will discuss how you can ensure you are accessing the best mortgage bridging loan provider.
What is Bridging Loan?
A bridging loan is a short term financial facility that enables the borrower quick access to funds for a short period of time. Bridging loans are often used to take advantage of a time sensitive opportunity such as the off-market sale of a property. In this way, a borrower would use a bridging loan to purchase a new property, prior to the sale of their old property. The bridging loan would then be repaid with the proceeds of the sale from the old property.
Bridging loans are offered by a number of banks and financial institutions and are a popular form of property finance. Given the short term, and high risk, property bridging loans often carry higher arrangement fees and interest rates, making them a more expensive option than traditional mortgages. The interest on bridging loans is commonly “rolled-up”, allowing borrowers to pay the interest and the principal off in one payment at the end of the facility. This offers borrowers the flexibility in that they are not required to make regular interest payments.
Given the attractiveness of bridging loans to both borrowers and lenders, there are hundreds of lenders who offer bridging loan products. With this in mind, borrowers should consider approaching a mortgage broker to assist them in securing the right bridging loan product from the right bridging loan provider.
Understand Your Needs
Each provider has different bridging loan products on offer, each appealing to a different borrower. With this in mind, borrower’s have access to a large number of different bridging loan products. In order to understand which product is right for you, you should have a good understanding of your needs.
There are a number of factors to consider when selecting the right bridging loan product
Loan Amount: It is important to understand the amount you require out of your bridging loan as this will determine which products you have access to. Some bridging loan providers will be restricted to certain loan amounts, while others will be able to offer bridging loans regardless of the amount.
Loan-to-Value Ratio: Some bridging loan providers will be better suited to a lower LTV and some will be better suited to a higher LTV, with this in mind it is important to consider what LTV you intend to lend at. Generally, most bridging lenders will prefer to lend at a lower LTV.
Term: The term of your bridging loan is also an important factor to consider as it may impact the interest rate and payment structure of your loan. It is important to remember bridging loans are short-term solutions, and that there are cheaper alternatives for facilities with longer terms.
Purpose: Some lenders will only provide bridging loans for specific purposes, it is therefore important to know which lenders you can approach for your specific purpose. A popular purpose is the acquisition of a new property prior to the disposal of an old one.
Location: The location of the property will also determine which bridging loan providers you will be able to access, as some are restricted to certain geographies.
As you can see, there are a large number of factors to consider when searching for the right mortgage bridging loan provider. On top of this, the sheer number of bridging loan providers and products can make for a very complex lending environment.
Advantages Of Mortgage Brokers
Brokers can help borrowers better understand their needs and how this impacts the pricing and availability of products.
Brokers have a large network of bridging loan providers which can be leveraged to access the most suitable bridging products.
Brokers have an in-depth knowledge of the bridging environment, making them an asset in the bridging loan application process.
Conclusion
The help of a mortgage broker can prove invaluable in the search for a bridging loan provider. While there are many bridging loan providers to choses from, they all appeal to different situations, locations and borrowers. Mortgage brokers are able to ensure borrowers have access to the right products from the right bridging loan providers.
In this way, mortgage brokers can save their clients money and time, ensuring their clients are well informed and stress free throughout the application process.
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