Bridging Finance Guide
We offer two types of bridging finance:
Open ended bridging
Finance to buy commercial or residential property for occupation by the borrower, pending the sale of an existing property on which contracts have not yet been signed and exchanged/missives concluded
Closed bridging
Finance to buy commercial or residential property for occupation by the borrower, pending the sale of an existing property on which contracts have been signed and exchanged/missives concluded
How does the bridging loan work?
Bridging finance is used to buy a new property when you haven't sold your existing property - it helps to ensure you don't miss out on your new dream home or commercial premises.
If you own your existing property outright (with no mortgage outstanding) the new bridging loan would usually be for the amount you need to buy the new property. When your existing property is sold the sale proceeds would pay the bridging loan off. In the case of closed bridging we would usually lend up to 100% of the value of the existing property. In the case of open bridging we would usually lend up to 75% of the value of the existing property. If this is not sufficient to cover the cost of the new property it may be necessary for us to secure the loan against both properties.
If you have a mortgage outstanding against your existing property the new bridging loan will need to pay this off as well as providing the amount you need to buy the new property. When your existing property is sold the sale proceeds would pay the bridging loan off. In the case of closed bridging we would usually lend up to 100% of the value of the existing property. In the case of open bridging we would usually lend up to 75% of the value of the existing property. If this is not sufficient to cover the cost of the new property it may be necessary for us to secure the loan against both properties.
If you have a mortgage outstanding against your existing property and will require a mortgage to be outstanding on the new property once the transaction is complete the new bridging loan will need to pay the existing mortgage off as well as providing the amount you need to put towards the new property (the difference between the purchase price and the amount of your new mortgage, which should be in place). When your existing property is sold the sale proceeds would pay the bridging loan off. In the case of closed bridging we would usually lend up to 100% of the value of the existing property. In the case of open bridging we would usually lend up to 75% of the value of the existing property.
In most cases the Bank will require you to open an account with us and deposit the equivalent of six months interest, which will be used to cover the monthly interest payments on the bridging loan so as not to cause a drain on your monthly income.
What will the lender require from you?
To consider a proposition we will initially require the following information (an underwriter may request further information):
- A completed bridging loan application form
- Identification for each party (for example, a passport)
- Three months Bank statements for employed applicants or six months Bank statements and two years audited accounts for self employed applicants
- A mortgage redemption statement (if you have a mortgage outstanding against your existing property)
- A copy of your building insurance certificate to show that you have at least building insurance cover on your existing property
- Estate agents particulars for both properties involved and a letter from the estate agent commenting on the saleability of the existing property including the expected sale price and the likely timescale for sale.
- Confirmation that contracts have been exchanged from solicitors ( Closed Bridge )
How much will it cost?
All applications are assessed individually, judged on their own merit and the interest rate determined accordingly. Typically Interest is charged at 3% the Bank Base Rate. Interest is calculated on a daily basis and is debited monthly. At todays rate thats an avearge of 0.71% per month. ( Base rate at 5.25% )
Other costs include:
- An arrangement fee of circa 1.50% of the loan amount (minimum arrangement fee £1000), depending on the amount you wish to borrow and the level of risk involved in the proposal - this is the charge for arranging the loan - this fee is paid at the point funds are released and is not charged if the loan does not go ahead for any reason.
- A security fee of £140 - this covers the cost of the work involved by the Bank in taking a first legal charge over your property to secure the loan - this fee is paid at the point funds are released and is not charged if the loan does not go ahead for any reason
- A remittance fee of £20 - this covers the cost of making a same day payment to your solicitor for the purchase of your new property - this fee is paid at the point funds are released and is not charged if the loan does not go ahead for any reason
How long will it take to arrange?
We recommend that you apply as soon as possible to avoid any delays. Once we receive your application we will pass it to a lenders underwriter who will assess it. From the time you hand you application to us it will take approximately seven working days for the Bank to give a verbal decision in principle. If the loan is approved there are likely to be conditions, which will need to be met before we will release the funds. We will write to you notifying you of our decision and any conditions which have been applied to the loan along with full details of what you need to do next. It is essential that you complete any documentation we send to you and return it without delay. The minimum time we recommend you allow between application and the release of funds is twenty-one working days.
At North Mortgages our Mortgage Experts will take care of everything on your behalf. Remember, we source mortgages from the whole of the market, so you know your getting the best deals available and all tailored to suit your personal circumstances.
Call NOW on: 08000 949 595 or contact us today to arrange a Call Back.
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