Wait - There's More Than One Type Of Bridging Loan | MarkMeets | Celebrity News, Music, Movies, TV, London Film Premieres

As its name suggests, a bridging loan is a short-term financial option that helps individuals or companies finance a transaction whilst waiting for another to complete. For instance, you can apply for a bridging loan to finance a new property while the existing one is on the market waiting for a closed sale.

There’s more than one type of bridging loan to suit multiple requirements from residential purposes to auction purchases, divorce settlements to accessing business cashflow. It’s essential to assess all the multiple bridging loan types before making your final decision. Some of the major bridging loan types include:

When it comes to selecting a loan which is right for you, it is important to understand that there’s more than one type of bridging loan to suit multiple requirements. The different types range from residential purposes to auction purchases, divorce settlements to accessing business cashflow. It’s essential to assess all the multiple Bridging loans and their types before making your final decision. Some of the major bridging loan types include:

First or second charge bridging loans

Charge bridging loans involve lenders putting a charge on your bridging loan after conducting a thorough assessment. Charge bridging loans mostly apply when you owe multiple lenders. The charge determines which lenders you repay first if you cannot pay all of them at once.

The charge also gives lenders the right to confiscate and own your property should you default in repayment. Charge bridging loans come in several forms with numerous implications. First charge bridging loans apply when borrowers do not have mortgages on their properties. In this case, you’ll prioritize the loan repayment over other financial obligations.

You’ll fall under a second charge bridging loan if you have a mortgage and can offer it alongside your new borrowing. With the second charge bridging loans, you’ll prioritize the mortgage over your loan if you default on repayment. In such cases, borrowers must sell their properties to pay back their loan amounts.

Regulated and regulated bridging loans

Some bridging loans can be regulated by accredited financial regulatory bodies like the Financial Conduct Authority (FCA). The authority ensures your bridging loan is secured against your own home, which may be the substantive collateral. You may be exempted from this arrangement if you opt for a second charge bridging loan purposefully for your business. If so, your bridging loan can be unregulated since your bridging finance counts as an investment property.

Open and closed bridging loans

A bridging loan can either be closed or open. Closed bridging loans have exact repayment dates, and lenders will ensure you agree on the date before signing off on your loan. And you will have to deliver on your repayment commitment before the loan term expires since defaulting on your loans may lead to additional charges to your original loan amount.

For this reason, closed loans appeal more to homeowners who have already exchanged contracts with their prospective buyers. That way, you have enough assurance to receive your money and repay your loan. On the other hand, open bridging loans don’t have a set repayment date. Rather, lenders will request proof of a borrower’s ability to repay the open bridging loan.

Borrowers can satisfy this requirement in several ways, and the requirements may differ from one lender to another. Generally, lenders will demand a guarantee that you can sell your property’s equity or consider a mortgage to pay back your loan amount.

Borrowers must provide evidence of the property for which they need the loan, disclosing details like the asking price, location, etc. You can add your plans to sell your current property to the details. Transparency with your lenders can help them understand your financial situation and provide the best assistance.

Generally, these are the broad types of bridging loans available on the financial market. It’s crucial to research their pros and cons before making your final decision.

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