How much can you borrow?
The maximum most lenders will go to on a residential bridging loan will be 75% loan to value.
How is interest charged?
Interest rates on bridging loans tend to be higher than your normal mortgage lending and are designed for a short period of time.
As they are short term, bridging loans usually charge monthly interest rates rather than an annual percentage rate (APR). This means that just a small difference in the interest rate can have a big impact on the overall cost of your bridge loan.
But the interest is not always charged monthly. There are three main ways it can be charged. These are:
Monthly – You pay the interest monthly and it’s not added to your bridging finance. This is also known as servicing your loan.
Deferred or rolled up – You pay all the interest at the end of your bridge loan. There are no monthly interest payments.
Retained – You borrow the interest for an agreed period, and pay it all back at the end of the bridge loan.
Some lenders let you combine these options. For example, you could choose retained interest for the first six months, and then switch to monthly interest.
How you are charged on your bridging loan can make a huge difference in the total amount you repay to the lender. It is key to take advice from a qualified professional to keep you overall costs to a minimum.