A Bridge loan is a short term loan used to bridge the gap between the need for immediate funds and the availability of long term financing or exit. It’s commonly used in property transactions, renovations, and to manage cash flow.

Serviced payments involve making regular interest payments throughout the loan term. This helps manage cash flow by spreading out the interest costs over time.

Lenders assess affordability by reviewing your income, expenditure, credit history, asset value, and exit strategy. They need to ensure you can manage interest payments and repay the loan at the end of the term.

An exit strategy is a plan for repaying the loan at the end of the term. Common exit strategies include selling the property, refinancing with a long term mortgage, or using proceeds from another investment.

Bridging loans are known for their fast approval times. Depending on the lender and your specific circumstances, you could receive funds within a few days to a couple of weeks.

Bridging loans are usually used where a property is inhabitable, needs to be purchased quick, or will require planning permission. Therefore, when we are looking at alternative products, we also need to compare to other short term funding solutions. Mortgages are not an alternative to a bridging loan most of the time as the product is usually unsuitable for dilapidated property, planning deals or fast transactions. Therefore, we would suggest that bridging loans are the most suitable option, unless planning was granted and development finance is then a more suitable product for those looking to raise funds towards purchase and renovation.

Bridging loans offer faster approval times, shorter loan terms, and higher interest rates compared to traditional mortgages. It’s designed for short-term needs, whereas traditional mortgages are long term loans.

Deducted interest involves rolling up the interest payments into the loan amount, which is then repaid in full at the end of the term. This preserves cash flow during the loan term but results in a larger lump sum repayment.

Bridging finance is typically charged monthly, with interest rates ranging from 0.5% to 1.5% per month. This charging structure offers flexibility but requires careful cash flow management.

While a poor credit history can make it more challenging to secure bridge loan, it is still possible. Lenders may offer higher interest rates or require additional collateral to mitigate their risk, especially where the exit is remortgage.

Bridge loans can be suitable for first time investors, especially if they need quick access to funds for a property purchase or renovation. However, it’s essential to understand the higher costs and have a clear exit strategy in place.