Bridging Loans for the Over 50s

Bridging loans can be a good idea under specific circumstances, such as when you need immediate access to funds to bridge a financial gap. They are particularly useful in scenarios like buying a new property before selling an existing one, funding a renovation project, or securing a quick business opportunity. However, they come with higher interest rates and fees compared to traditional loans, so they should be considered carefully.

Bridging loans can be expensive, however, they are a brilliant solution for the right customer. The set-up fees and interest rates can be higher than with a traditional mortgage, however, they are a short-term solution.

We advise our customers who are looking to purchase via a bridging loan to factor any bridging finance costs into the overall cost of the property to see if it’s viable.

Bridging finance is often used to purchase do-er upper properties at auction where a 28-day exchange is required.

Your bridging loan broker will run through all the associated fees before you apply to ensure your understanding.

It’s always best to get a bridging loan via a mortgage broker as this will save you time and money. Bridging finance is classed as specialist lending and many lenders only offer their products and deals via brokers. Due to the nature of the lending mistakes can be costly.

You’ll need to provide details of your assets and liabilities along with your income as part of the application process. You’ll need to have a plan in place to repay the loan, such as from the sale of a property or via a future remortgage.

Your mortgage broker will research the current deals available and recommend the best bridging loan for you based on your personal situation.

Bridging loans can be processed quickly compared to traditional loans. It is possible to receive funds within a few days to a couple of weeks, depending on the complexity of the application and the lender’s processes.

Typical terms for a bridging loan include:

• Loan Term: Usually ranges from a few weeks to 12 months.
• Loan Amount: Can vary widely, often starting from £25,000 up to several million pounds.
• Repayment: Can be interest-only with the principal repaid at the end of the term, or rolled-up interest where the total interest is paid at the end along with the principal.

Bridging loan interest rates are usually higher than with traditional mortgage lending. Due to the speed of the loan being paid out and the short-term nature, the risk is much higher to the lender therefore they price this accordingly.

Still, even with higher interest rates, bridging loan can be a cost-effective solution for the right customer.

Bridging loans are used to:

• Purchase Property: Buy a new property before selling an existing one.
• Property Renovation: Fund refurbishment or development projects.
• Business Opportunities: Secure urgent business funding or deal opportunities.
• Auction Purchases: Quickly secure funds to buy properties at auction.

As with regular mortgages, there are lots of different types available to cater for individual client circumstances. As part of receiving great Bridging Finance Advice, your advisor will recommend the best way forward based on your situation.

Here’s a summary of the two main types of bridging loans that are available:

• Closed Bridging Loan – A closed bridging loan has a predetermined repayment date, typically when a specific event occurs, such as the sale of an existing property. This type of loan is suitable when you have a clear and fixed timeline for repaying the loan.
• Open Bridging Loan – An open bridging loan does not have a specific repayment date and is used when the borrower is confident about repaying the loan but hasn’t yet finalised the exact timeline. This type of loan offers more flexibility in terms of repayment.

Depending on your personal situation, there may be alternatives to taking out a bridging loan. Here’s a short list of the most popular ones, your advisor will run through these in more detail.

• A Regular Mortgage – This will depend on whether this longer-term finance will suit your situation and if the property is in a condition to qualify for a mortgage.
• Secured Loan/Second Charge – As above, in addition, you’ll need permission from your existing mortgage lender and enough equity in the property to qualify.
• Personal Loan/Credit Cards – If you’re only looking for a small amount it might be worth considering unsecured borrowing such as a personal loan or credit card.
• Development Finance – These loans work in a slightly different way and can be a great product for investors looking at refurbishment projects. We’ll help compare options here.
• Fast House Buying Companies – These can be useful if you’re looking to release cash in the short term and qualify for a good price.