subject: Typical Characteristics Of A Bridging Loan [print this page] Bridging loans are loans that are used to provide financing in a situation where an individual or commercial property owner has an existing property that hasnt sold yet, but they have already decided on a property to purchase. These loans allow property owners to go ahead with the purchase of the new transaction. Typically either the old property or the new one or both are used as collateral. Below are more details on characteristics of bridging loans.
Loan to Value and Other Details
For a bridging loan the loan to value is usually higher than other traditional financing. Additionally, residential properties usually have higher loan to values than on commercial properties. A few details about the loan to value for these loans are listed below:
70% loan to value for residential properties
55% loan to value for commercial properties
There are some things to keep in mind and a few other items to consider as outlined here:
People with different financial situations can apply, including self-employed, partnerships, retired and those with bad credit history. Even those with no proof of income are eligible
Any type of properties can be considered, including residential or commercial land
100% of market value financing can sometimes be secured if additional properties are used as collateral
Approval can typically be made within 24 hours
Funding can vary depending on each situation, but it can take anywhere for 1 week up to 3 or 4 weeks. Some lenders may claim shorter funding times, but use caution when working with these lenders as anything less than the times outlined above is highly unlikely.
Rates and Limits of Bridging finance
Borrowing limits will vary depending on the state of the market, but current conditions show the following:
Average is under 500,000
Minimum borrowing limit is around 30,000
Rates are usually typically high and loans have to be repaid within 12 months. With the interest rate so high, it can get very expensive to borrow beyond that. Residential and commercial rates can vary depending upon lender, but below is a good estimate of what you can expect:
Residential Rates
Starting at 1.25% per month
Minimum term 1 day
Commercial Rates
Starting at 1.25% per month
Minimum term 1 day
Typical Fees for Bridging Finance
Listed here are typical fees that are charged in the funding of the loan.
Standard Fees
Administration fee
Appraisal fee
Title policy
Notary fee
Recording fee
Wire/courier/drawing fee
Variable fees
Loan origination fee (fee based on the amount loaned)
Deciding to go with a bridging loan can be a great choice if youve already found a new property to purchase but have you existing property still on the market. By being able to purchase a property quickly, you can be one of the first people to a good deal and also negotiate the best price. Shop around looking at different lenders to be sure you find the best bridging loan deal.
