Bridging Loan Example, a bridging loan is a short-term loan that is used to purchase land or property or sometimes they are used to release equity from a property that is already owned, these loans are based on the value of the property or asset that is offered as security, this is what is known as the loan to value and most lenders will offer up to 75-80% loan to value when offering a loan, you can get up to 100% for the purchase of a property but in these circumstances you would need to have enough equity built up in the properties that were being offered as security to the lender, below we have a examples of how bridging loans are calculated.
The basic costs that a bridging loan comes with are as follows
The interest rates that will be offered to you are really based on the loan to value that you require, with a higher one the lender is deemed as taking more risk so the interest rates would be higher, a high loan to value would be anything over 75%, for loans of 50-75% the best rates are on offer these currently start at 0.4% per month, you should note that bridging lenders quote rates as monthly rather than annually.
This is a fee that is added to the loan and lenders nearly all charge 2% of the loan amount so for a £100,000 loan you will be expected to pay an arrangement fee of £2,000, you will not be asked to pay this up front in nearly all cases it is deducted from the loan when it is first paid to you.
You will also have to pay for a surveyor to carry out a valuation for the lender this can be as little as £200 for a simple loan but will rise in accordance with the size of the loan and any complexities that the property could have.
You will also be expected to pay for legal fees, these will be for both your own solicitor and the lender's fees these can be agreed before they are instructed to start work.
Below is a Bridging Loan Example.
Property Value £200,000
Loan Required £100,000
Loan To Value 50%
Arrangement Fee £2,000
Interest 5% pm £500
So in this example if you had the loan for 12 months you would have costs as follows:
Total for the 12-month loan would be £7,700
If you want further information on how bridging loans work or more bridging loan examples, then we can go through the details with you to work out exactly what the costs would be over the term of your loan requirement.
Note some Bridging Loans are Authorised and regulated FCA regulated. We are fully authorised by the FCA
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Bridging Loan Example, see examples of Bridging Loans how they work and what costs are involved. Also Compare Bridging Loan Lenders.
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