What do you Need to know about Unregulated and Regulated Bridging Loans?
If you are moving house, then you may want to think about getting a bridging loan. A bridging loan can be very useful if you want to purchase a new property, but you have not been able to sell the property you have yet. A bridging loan is normally done over a very short term and it is a great way for you to bridge the gap in your funding. Bridging loans are particularly useful if you want to buy a property at auction and need the money right away, but are still in ownership of your current home. When you take out a bridging loan, you need to be mindful that it will be secured against the property, so if you do not keep up with your repayments, then you may find that your home ends up being put at risk.
An Example of how Bridging Loans Work
Let’s say you look at a property you like, and it is valued at £350,000. You may need to put down £100,000 as your deposit, and although you have £25,000 in savings, you still need to raise £75,000 for the rest of it. The home you have now is valued at £250,000, but this means that you are in need of £75,000 so you can make your offer. In this situation, a bridging loan would be very viable. This will help you to bridge the gap for your deposit. When you sell your home, you will pay back the loan plus interest.
Regulated Bridging Loans VS Unregulated Loans
Bridging loans can either be unregulated or regulated. Unregulated is for when you buy a property, do it up and then sell it on. Regulated loans are for when you intend to live in the property. If you have a closed bridging loan, then there will be a fixed date for you to repay your loan. If you have an open bridging loan, then you will not have any date to make the repayments, but you will be asked to pay it within a year.
What Can I Use a Bridging Loan For?
Bridging loans can be used for a vast number of reasons. It may be that, as mentioned above, you are buying a property at auction and that you need the money quickly. Renovations are another reason. It may be that you need a loan to cover the cost of a renovation until you are able to re-mortgage and release the equity.
Another option would be if you are purchasing land. If you are building your own home, then you could use a bridging loan to cover you for the land and the building work until you can go ahead and apply for the mortgage.
Am I Eligible for a Bridging Loan?
If you want to be eligible for your bridging loan, then you need to be the age of 18 or over. You also need to make sure that you have some collateral that you can use as an asset. This is usually your property. You also need to make sure that you live in the UK. If you can meet this criteria, getting a bridging loan could be an option for you.
Source:
MoneySuperMarket
