WHERE TO FIND A BRIDGING LOAN

WHERE TO FIND A BRIDGING LOAN

There are two sources for such loans – banks and bridging loan
companies.

Banks
As a general rule you should approach your bank in the first
instance and go elsewhere only if you are turned down. The
possible benefits are as follows:
- A lower interest rate. The rate will still be very high but in
most cases lower (though not by much!) than the prevailing
rates elsewhere.
- Lower fees. As a general rule, banks will charge a single
arrangement fee, typically 1%, and are unlikely to hit you with
punitive legal costs.
Unfortunately, that ’s where the good news ends. Banks can pose
problems:
- They can be slow. If speed is of the essence you may fall at the
first hurdle.
- Banks don’t like an open bridge. This is where there is no clear
and definite date for redeeming the loan. In practice this means
your bank may want to see a mortgage offer from another
lender before they will agree to do the bridge. But if you have
a mortgage offer, you are almost there!
Bridging loan companies

Here you have to tread carefully. Bridging loan companies come
in various guises and it is very important to distinguish between
them at the outset.

The most common error is to mistake a broker for a lender. This
is very easy to do as many intermediaries use trade names which
clearly suggest that they are principals rather than agents. You
could be some way down the application process before realising
your mistake. Does this matter? Yes, for two reasons:
- You will incur a broker fee of at least 1%.
- You are not dealing directly with the lender, thus running the
serious risk of delays and misunderstandings.
If you are answering an advertisement ask, at the outset, if you are
talking to a principal lender. If you are looking at a website, don’t
neglect to press the ‘About us’ or the ‘Corporate profile’ button
for this vital information.

If you have no luck with your bank, a simple Google search on
the internet is undoubtedly the quickest way to draw up a short
list of bridging loan companies. Other sources are advertisements
in auction catalogues and the financial pages of national
newspapers.