Property Finance Lawyers
Bridging Loan Solicitors
Bridging loans are typically used in situations where a person or company needs a short burst of capital until they can secure more permanent financing or until a specific event occurs that provides the funds they need.
As a result it is very common for people who are buying at auction to use a bridging loan. In order to purchase a property using a bridging loan you will require a specialist solicitor.
We can help facilitate this process as part of an auction pack review and completion. Call 01473 229888 for a quote.
Bridging Loan Legal Service
As a property law firm, Attwells Solicitors is your ideal choice for purchasing with a bridging loan. Our Property Auction Team can complete your auction conveyancing while undertaking the legal work required by your lender.
A bridging loan, often simply referred to as a “bridge loan” is a short-term financing option designed to bridge a gap between a short-term financial need and longer-term financing. Due to the nature of the loan, the lender will require a number of checks and conditions to be met. These differ and can increase if you are purchasing as a company.
Common Uses in Real Estate:
- Buying a New Home Before Selling the Old One: If a homeowner wants to buy a new property but hasn’t yet sold their existing home, a bridging loan can provide the funds needed to make the purchase. Once the old home is sold, the proceeds can be used to pay off the bridge loan.
- Property Development: Developers might use bridging loans to start a project before securing long-term financing.
- Auction Purchases: Property buyers at auctions might use bridging loans to quickly secure a property, given the typically short time frame between winning a bid and needing to complete the purchase.
Risks and Considerations
While bridging loans can be beneficial, they come with risks. The higher interest rates can accumulate quickly, and if the expected funds (like from the sale of a property) don’t materialise, the borrower might struggle to repay the loan. It’s crucial to have a clear exit strategy when taking out a bridging loan.
As part of our bridging loan legal service, we will break down the clauses, terms, and conditions so you are fully aware of the risks involved and your obligations to the lender.
This can include regular updates, completion within a certain timescale, and paying additional fees.
For more information about buying at Auctions watch our YouTube video.
Characteristics of a Bridging Loan
- Short-Term: These loans are usually for a period of a few weeks to a couple of years.
- Higher Interest Rates: Due to their short-term nature and the risk involved, bridging loans often come with higher interest rates compared to more traditional forms of financing.
- Secured Loan: Bridging loans are typically secured against property or other assets. If the borrower fails to repay, the lender can take possession of and sell the secured asset to recover their funds.
- Quick Approval: One of the advantages of bridging loans is that they can often be approved and funded more quickly than traditional loans.
- Flexible Repayment: Some bridging loans might offer rolled-up interest, meaning the interest is added to the principal and the entire amount is paid at the end of the term.
