I’m separating from my partner and need to borrow money for a new home.
Life does not always work out as intended and if you need a fast solution to a situation of relationship break up a bridging loan might be suitable for you.
Owning a property with an ex-partner can be uncomfortable particularly if you feel you have to continue to live there. Alas, selling a property can take time and could make an uncomfortable situation ten times worse.
In this context, how can a bridging finance work for you?
How Can Bridging Finance Help?
Here are two ways that Bridging Loans can work in the case of splitting up with a partner:
1) If there is enough equity in your existing home, the bridging loan can be used to release funds to purchase the new home. The bridging provider will need to know how their bridging loan might be repaid: this could either be through the sale of the existing property; or by obtaining a new conventional mortgage on the new property.
2) Buying a new property with the bridging finance and then remortgaging it to a conventional mortgage. Importantly, most mortgage lenders will require the property to be owned for at least six months before they would consider to lending – so you will need to be prepared to stay on the bridging loan for that length of time.
What does Bridging Finance Achieve?
The loan can be arranged quicker than a conventional mortgage. The existing property can be sold at its full value – rather than a forced fire-sale rate. Your Ex-Partner might also need some breathing space to find a suitable home or arrange a remortgage to buy your share out.
Overall obtaining a fast bridging loan could be the most amicable way for all concerned.
How much equity do I need to obtain a Bridging Loan?
Normally 25% in either the existing property(s) or the new one. You can also use other properties you own to leverage bridging funds.
What are the typical rates and charges for Bridging Loans?
The bridging loan rates tend to vary between 1% and 1.75% per calendar month. The variance depends on the collateral and your status.
The charges on bridging loans do differ greatly from bridging lender to bridging lender. There is normally an bridging loan application fee, payable to the bridging loan provider, which is a fixed amount circa £500 to £2,000. A bridging loan valuation fee which will be dependent on the property value, but typically starts from about £250 and moves up in price £50 approx for every £75,000 denomination in property value. There is normally a fee payable to the bridging lender by deduction from the advance which is percentage based and can be between 1% and 3%. You will need to pay the bridging lender’s legal fee for arranging the loan. This is charged per property and is circa £500.
What Other fees are associated with Bridging Finance?
Your own legal fees and an advice fee to your Bridging Loan Broker. The latter is normally money well spent if the Bridging Broker operates from a wide bridging loan provider panel as they will make sure the bridging loan rates and fees you are paying are the best available.
For Short Term Loan / Bridging Finance Advice please complete our Contact Form and of course if your enquiry is of a urgent nature please call me directly on T: 0207 9932044
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.