A bridge loan is a kind of short-term financing that lasts between one and 24 months. It’s used to cover the gap until you can get a longer-term source of funding for something.
When are bridging loans used?
Bridging loans are frequently utilised to acquire houses, construct, renovate, or refurbish properties, buy-to-let investments, tax obligations, business ventures, and divorce settlements. Bridging loans are also used by individuals in the property development sector who need to make large payments on short notice.
Fees to be aware of
When obtaining a bridging loan from the likes of Finbri, there are some important fees that you need to be aware of before proceeding. From broker fees to administration fees, every cost contributes towards ensuring you get the best possible loan for your needs.
Broker fees
If you use a broker like Finbri, fees paid by the broker will go towards assisting with your loan application, reviewing bridge loans or development finance solutions for you, and finding the finest solution for you. The normal broker fee is about 2% of the total loan.
Facility fees
The lender charges a facility fee, sometimes known as an arrangement charge, to the borrower for providing the loan facility. It’s usually 2% of the entire amount supplied, but it may differ from one lender to another.
Valuation fees
The cost of a property’s valuation is determined by the type of property. A commercial or residential property would require a distinct firm that specializes in the particular sort of property and the location where it is.
Since the COVID-19 epidemic, there has been an increase in Desktop Valuations that do not require a true valuer to come on site. They may also be available when the property being assessed is a straightforward residential asset.
Administration fees
There are administration fees with each loan, from application to completion. These fees vary depending on the loan type and circumstances.
Redemption fees
The lender may charge a fee to withdraw the ‘charge’ from your house or other properties that were utilised as security, due to the associated expenses of doing so.
Solicitor fees
Lenders employ solicitors to set up and secure a charge over a property. The borrower is charged this fee for preparing legally binding agreements, etc.
To summarise
All of the costs you will incur will be presented to you in an easy-to-understand manner so that you are always aware of what you are being charged for and why. In most cases, the terms of the loan proposal are always included. There should be no grey areas in any transaction.
While all of the costs involved with bridging loans might feel overwhelming at first, they are perfectly justified and ensure you get the most value possible. If you have any concerns about costs involved with your loan, speak to your lender. They are obligated to be completely transparent and will happily assist you.
