Is a Bridging Loan a Quicker Route to Securing Your Home than Awaiting a Mortgage Approval?

By : Nick Marr

To a degree, bridging finance is designed specifically to do all the things the traditional mortgage cannot. Quick and easy access to the funds required, simplified application processes, elimination of credit checks – all part and parcel of the deal with many types of bridging finance.

This is precisely why bridging loans are routinely turned to when time is a factor. If you simply cannot wait for a mortgage application to be approved and subsequently actioned, a bridging loan could be the ideal alternative.

Despite being typically associated with commercial property investments and business applications, bridging loans can also be useful for residential property transactions.

First Come, First Served

The UK residential real estate market will always be somewhat cutthroat in nature. As far as the overwhelming majority of developers, estate agents and sellers in general are concerned, it’s the classic case of first come, first served. Roughly translated, you either secure the home of your dreams at the earliest possible stage or you risk losing out to a rival bidder.

Unfortunately, typical mortgages don’t make it easy to snap-up premium properties at the drop of a hat. You find the home of your dreams, you put your existing property on the market and you begin penning your application. Long before your mortgage has come close to being approved, the property you had your eye on is gone…sold to someone else.

Given the complexity and time-consuming nature of traditional mortgages, it’s a surprisingly common problem.

An alternative to the more traditional mortgage product, a residential bridging loan could hold the key to avoiding such scenarios. Sidestepping the complexities associated with traditional mortgage applications, residential bridging loans are all about speed, simplicity and surprisingly affordable borrowing costs.

How Residential Bridging Loans Work

The basic premise behind a residential bridging loan is surprisingly straightforward. Rather than waiting for your mortgage application to be approved, you simply secure the funds you need by putting up your existing property as collateral. If your current home is deemed acceptable by the lender, the money you need to pay for your new home could be made available within a matter of days.

Hence, the answer is yes – a residential bridging loan is indeed a quicker route to securing your home than awaiting a traditional mortgage approval.

In addition, completion of a bridging loan contract is also exponentially simpler than a traditional mortgage. Rather than being repaid over a period of several years or decades, bridging loans are designed to be repaid after around six months. When your current/former property sells, the funds raised can be used to repay the bridging loan in one simple lump-sum payment.

Due to the simplicity and short-term nature of residential bridging loans, this type of home-purchase finance can be uniquely affordable. Some types of bridging finance are available with interest rates of less than 0.5% per month, with minimal fees and comparatively low overall borrowing costs. So along with snapping up the home of your dreams before anyone else does, you could also save a fortune by opting for bridging finance.

Calculating the Costs

In order to determine whether residential bridging finance is for you, it’s worth checking out the specifics with an online bridging loan calculator. Enter a few basic details for a better idea of the costs incurred and the various options available.

Prior to penning an application, be sure to consult with an independent broker and organise a whole-of-market loan comparison. This way, you’ll gain access to an extensive range of specialist services not available on the High Street.

Article by iConquer