Everything is relative in terms of cost. Alternative forms of flexible finance, such as bridge loans, may be more expensive than traditional counterparts. However, this expense is only temporary.
Bridging loan terms are typically only a few months long and can be quickly exited into traditional finance or through other channels, like asset sales.
You must keep in mind that, even though there may be less expensive deals on the high street, your particular situation may not be best served by a conventional mortgage or long-term solution. As the economy has changed over the past year, mainstream lenders pulled deals and tightened their standards, leaving some borrowers without the funding they require to carry out their plans.
For your residential and commercial investments, borrowing loans can offer quick and flexible financing. You typically use collateral as security such as real estate.
Depending on the bridging lender involved, the lengths may change. We typically assist with financing arrangements at Accelerated Finance for three to twenty-four months.
Many of our clients frequently ask, "Are bridging loans expensive?" because they can be challenging to fully understand. '.' This blog, therefore, looks into the various fees the loan may impose. We'll look at the cost of bridging loans and how to justify them.
What Fees Should You Expect With A Bridging Loan?
The cost of a bridging loan will be largely determined by the interest rate and loan term, just like with any other loan.
Depending on how you intend to use your loan, these fees may change. This could involve investing in commercial real estate, renovating a home, or purchasing land. As a result, the fees will change depending on the lender you choose.
Additionally, you will be required to pay more the longer the loan term.
Alongside the above, we give below the main fees to expect from a Bridging Loan
Product/Arrangement Fees
Most lenders will generally charge you a product fee for loan delivery. This fee, which can range from 1.5% to 3%, is typically calculated as a portion of the loan amount. Product fees are typically 2% in price.
For instance, the product fee would be £6,000 if you were looking for a loan of £300,000. However, the fee may typically be waived or reduced if you are applying for a very large loan.
Valuation and Survey Fees
One of the key elements influencing the cost of funding is what a bridge loan will be used for. To determine whether a property is worth the loan you're after, lenders frequently request an inspection. If you are unable to repay the loan, they will also want to make sure it is in good condition in case they need to repossess and sell the property.
In general, fees can increase in price as a property's value increases. For a valuation, the majority of borrowers should budget between £400 and £1000.
Deposit
Although bridge loans typically don't have a "deposit" as such, there will probably be the highest loan-to-value that can be obtained on real estate. Generally, we work with lenders who can go up to a maximum of 75% Loan to Value, which would require a 25% deposit.
In some cases, 100% Loan to Value can be provided if additional security can be provided. The bridging loan will typically become less expensive the lower its LTV.
Broker Fees
You can approach lenders directly, but you might want to use a bridging loan broker's services. They can assist you in locating the ideal financial product for your situation and properly completing all the challenging paperwork.
Once more, a portion of the loan amount is used to calculate broker fees. These proportions can be as low as 0.5% or as high as 2%. A flat fee might also apply.
At Accelerated Finance we are a fee-free broker and get paid by the lender once the finance completes. We have access to over 50 lenders in the specialist finance space.
Calculate your loan and interest with our bridging loan calculator.
Disclaimer
This article is intended to provide a general understanding of the topic. The contents should not be treated as advice.
Accelerated Finance Limited only considers applications for commercial or investment properties.
Accelerated Finance Limited is not regulated by the financial conduct authority and only provides unregulated loans via our network of lenders. Your property is at risk if you fail to make payments on a Mortgage Contract. Please note that Accelerated Finance Limited and its employees do not give financial advice or recommendations on any product.
