How is a Bridging Loan Different from a Mortgage, there’s a certain air of mystery around bridging loans, and the easiest way to remove that mystery is to think of bridging as just a short-term mortgage. It’s different in some important ways, which we will cover soon. But bridging loans and mortgages are more similar than they are different…
The most important and obvious similarities are:
- The amount the lender will give you is determined by the value of the property
- A “charge” is taken on the property as security
- You’ll pay interest for the agreed loan term
So far, they are similar. But there are important differences too know…
The most important difference is the duration:
- You’ll often take a mortgage out for 25 years or more, but bridging is generally for 12 months or less
- Mortgage rates at the moment are under 5% per year for most borrowers, but bridging loans tend to be more
Those are the most obvious differences when you sit down and compare the two.
But there are other differences too and it’s these that allow you to use bridging in creative and interesting ways…
In general, bridging lenders aren’t bothered about your personal income, so you can get a bridging loan even with low earnings. Bridging lenders aren’t bothered about the rental income the property could produce (because it wouldn’t be unusual for the property to be empty for the whole term of the loan). The condition of the property doesn’t matter so much. No kitchen, no bathroom, no way to keep the rain off because the roof is full of holes? No problem! And importantly, bridging finance can be much quicker to arrange: think weeks (in a pinch, days) rather than months. To find out more about bridging finance please see our other blogs or contact us via the contacts page on our website…
