Bridging loans are a fast funding solution. They are very suitable for the buyers of the property or the investors. However, many borrowers cannot comprehend the entirety of the price. It is much easier to concentrate solely on the interest rate level. However, this is true for one reason: you will likely encounter hidden costs. Hence, there’s a need to estimate the total cost before deciding.
This article will simplify this by elaborating: Here, we will discuss the various types of fees & charges, types of interests, terms & conditions, and so on. Even more important, we’ll help you gain courage when comparing different lenders.
Firstly, let’s understand the basics. A bridging refinance is, therefore, another form of short-term finance. It assists in linking the arrival and the need to sell a property. For instance, you may move to acquire a newer house when you have not sold the existing one.
Or, it may be required to purchase a business when there is a desired auction property for quick funding. In other words, it is a short-term solution to an organisation’s financial problems.
Due to this, they are preferred by property developers and investors.
In other words, you need to understand that bridging loans differ in their elements, unlike normal mortgage loans. Hence, one has to look further than the sometimes quoted nominal interest rate.
Now, let us see all the costs involved:
In the first place, one needs to know whether it is a monthly or an annual subscription. It is also important to note that the interest rate on a bridging loan is usually given per month. For example, a 0.8% monthly rate equals 9.6% per annum.
Further, some lenders use compound interest. Others offer simple interest.
Types of Interest Charges:
Finally, it is crucial to ask the lender about this.
Further, the borrowers have to pay arrangement fees besides the interest rates that the lenders demand. These are usually charged 1–2 per cent of the loan advance. For example, £200,000 borrowing may also include a £4,000 balance transfer fee. Of course, this is done upfront or becomes part of the loans.
Key Points:
Therefore, these should be incorporated when comparing quotes.
Furthermore, there is a need for a property valuation in the lending process. This fee varies depending on the size and the type of the property; Also, the identification of the commercial type of business increases the cost of the evaluation. However, it is essential to note that the borrower pays this before the loan is granted.
Expected Costs:
Hence, valuations ought to be factored right from the outset.
The employer and employee both have their own lawyer. You will pay both your legal charges and the financier's charges. These also depend on the type of property and the extent of work required. Also, getting multiple options from the same lender to reduce costs is possible.
Typical Charges:
Thus, asking for legal quotes at the initial stage is always desirable.
Some lenders will charge you an exit fee if you repay your loan before the agreed time. For instance, it may be one percent of the loan or the price of the property paid by the customer. In other words, this creates another level of cost.
Know the Exit Costs:
In conclusion, one must confirm the exit charges in advance.
Anyone who has a broker will incur a cost. This can be flat ($500–$1,000) or a percentage (1%). However, a good broker assists you in earning more than they charge you. For instance, they can obtain more favourable interest rates or favourable loan conditions.
Broker Fee Tips:
Indeed, brokers are required to be very transparent while executing their respective tasks.
Some loans penalise early payments. This may sound strange, though it can occur at times. For instance, if interest is ‘’retained,’’ the interest is paid despite early repayment of the loan. Also, it is necessary to verify if there are minimum loan terms.
Questions to Ask:
Therefore, read small differences carefully.
Bridging loans are short-term, but length still matters. For example, a 12-month loan at 1% per month costs 12%. A 6-month loan costs 6%. In the same vein, a delay in repayment increases costs. Therefore, always plan your repayment strategy.
Let’s look at an example:
1% x 6 months = 6% = £12,000
£200,000 (loan) + £12,000 (interest) + £8,700 (less fees) = £220,700
Therefore, the amount should be £20,700.
When it comes to bridging loans, choosing the right lender is essential. Kinetic Finance is a well-known company in the United Kingdom.
Most of all, we specialise in affordable, instant temporary Finance for any purpose – property purchase or remortgage, auction, and development.
Most importantly, Kinetic Finance provides:
For instance, the quick decision-making process that the company has embraced, and the dedicated case managers, make it easy.
Also, we help limited companies, individuals, and expats.
To be precise, Kinetic Finance boasts the highest speed, clarity, and credibility compared to its competitors.
For more information on this, connect to Kinetic Finance
In conclusion, bridging loans may be very beneficial. However, the real cost is a factor that is valuable to know. Do not fixate on the interest rate. Beware of all the fees that may be charged in addition to the interest rate, and do not forget to consider all the terms and options regarding the repayments.
Also, work with companies like Kinetic Finance that have nothing to hide. Thus, a loan that is calculated well is wise.
Plan wisely. Compare options. Ask questions. And borrow with confidence.
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