Mike Collins Mortgage Expert – Bridging loans can be a great option in the face of rising interest rates

Bridging loans can be interest-only loans and are usually used by those who need immediate access to funds. It is essentially a bridge between creditors becoming available and debt coming in.

A short-term lifeline can be used to help those who are looking to buy property right away or at auction, renovate, build, or do other work – especially when time is tight.

Mike Collins, a financial planner with 17 years experience, stated: ” With almost a third of homebuyers losing their property purchases because of mortgage delays, the importance to be able move quickly from the borrower’s perspective is clear – and they can do so by getting a bridging loans

“Interest rates for bridging loans is higher than other financial products, and I’ve had a lot of people ask me recently whether they should be concerned about interest rates having increased.

“A bridging loan can be repaid in as little as a month, which makes it more affordable and allows for more control over the interest. Below is a detailed explanation of bridging loan and their utility in current times.

Rates of interest on bridge loans

These can be fixed. They provide stability, provided you continue to make your payments on time. Variable loan interest rates change according to the Bank of England base rate which is currently 2.25% (Sept.2022).

Naturally, higher interest rates equal higher repayments.

Rates may also vary depending on what you are using the loan for. The rates charged for bridging loans for land and business bridging loans will be higher than the rate for residential property.

Buyer demand is extraordinary. This results in delays in conveyancing and purchasing, which leads to increased demand for bridging loan.

It’s important that you understand the monthly pricing of interest rates. This is because most terms are between 9-12 month.

Fast access to cash

Bridging loans are quicker than secured loans or mortgages if time is critical.

The funds can be released as quickly as three days. This sets bridging loans apart from the rest.

It is easier to arrange as the lending decision will depend on your exit plan. It is the way you intend to pay back the loan after the term ends.

Even if you have poor credit, you can still apply for one

Your credit rating will not only determine whether or not you are approved for a bridging loan, but it can also affect the interest rate and fees you might be charged.

You can still get one even if your credit isn’t perfect. This is because lenders will place more emphasis on the property value than your credit score when determining rates.

The loan is secured against an asset and there are no long checks.

Help with broken chains

Recent research revealed that one-in-five applicants needed a bridge loan because their timeline for purchasing was delayed.

Bridging loans, which can still be used to facilitate a sale, are possible despite completion times of an average four months.

However, the current increase in interest rates could result in a drop in buyer demands and, consequently, a decline of bridging loan applications. However, these loans could provide financial support for many buyers and property developers.

Whatever bridging loan you choose to take out, make sure they are members the Financial Conduct Authority (FCA). This allows for any complaints, particularly if large sums are involved, to be dealt with in accordance the FCA guidelines.

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