An example of bridging loan costs
When money is required in a hurry or for a short time then a bridging loan is quite often the best option. However, before taking out a bridging loan there are some important factors to consider.
These important considerations are the costs of the bridging loan, and when taking these costs into consideration asking is bridging really the best option? The second important factor is how the bridging loan is going to be repaid and when. It is also important to give some thought to the question what if there is a problem with the proposed method of redeeming the bridging loan? What other options are there?
Back to the first important consideration which is the cost of bridging finance. There are many bridging loan providers, at KIS Bridging loans we are aware of over 130 bridging lenders in the UK! All of these lenders offer different borrowing terms and have different lending criteria. With a variety of rate and fee structures available it is obviously important to find one of the best deals available.
The typical costs associated with a bridging loan are the arrangement fees, monthly interest charges and legal costs. Depending on the amount being borrowed, and for how long, this will determine how much a lender will charge both for monthly interest charges and also as an arrangement fee. These charges are usually made in the form of a percentage, so it is important to work out what this percentage means to you in real money terms.
In addition to the above mentioned charges, nearly all bridging loans will also incur legal costs, which will vary from one lender to another. Some lenders also might charge an exit or redemption fee. It is therefore very important to look at the arrangement fees, legal costs and if applicable redemption fees as a whole in addition to the amount being charged each month for the loan in terms of interest.
Finally before a bridging loan is even taken out costs are usually incurred in the form of valuation fees. Bridging finance providers will require a valuation and sometimes a full survey of any property being offered as security for a bridging loan. In some circumstances applicants may already have an acceptable valuation report available, but if not one will need to be provided. Lenders will usually arrange for a valuation to be carried out, but of course this does cost!