Bridging loans in the UK are used by almost everyone and are used for a wide variety of different reasons.
There are things needed to prove your plans, security, and financial history to get the loan in the first place. On the other hand, bridge loans in the USA are mainly used to purchase a property while you still have a house.
To answer the question, is there is a difference between bridging loans in the UK and bridge loans in the USA? Yes, there is.
Bridging loans in the UK are used by almost everyone i.e. individuals, businesses, property developers, investors and builders and are used for a wide variety of different reasons. There are things needed to prove your plans, security, and financial history to get the loan in the first place. On the other hand, bridge loans in the USA are mainly used to purchase a property while you still have a house.
A bridging loan in the UK is a short-term financial solution used to fill in the gap between two situations. It is typically paid back within a year, has interest rates and additional fees that also need to be paid on top of the loan.
There are many lenders and brokers available where bridging loans are available, and they are used for various reasons. Some of their uses include:
- Property development
- Renovation of a property
- Inheritance tax
- Purchasing a property
- Business use
These are just a few uses of bridging finance. The uses should be discussed with the lender and agreed upon.
Key Features Of A Bridging Loan In The UK
Some of the critical features of a bridging loan in the UK include:
- Quick to get one
- Easy application process
- Can have large amounts of money within days
- Can be used to help towards a project and help to complete it financially
- A short term so can be paid back quickly
- Plenty of lenders and brokers that can meet your needs
What Is Needed For A Bridging Loan In The UK
When applying for a bridging loan in the UK. there are some things that you need to get approved for one by the lender.
Security-Security is something that you have to have when applying for a bridging loan in the UK.
Security is the equity in assets that you own, property, land, cars, etc. Bridging lenders will consider any high value asset.
The main point of having security is that the lender is protected, as they keep this security until the loan gets paid back. If the loan does not get paid back, the lender takes the security and gets paid back that way, instead.
- Exit Strategy-
Another essential factor that you need to apply for a bridging loan in the UK is an exit strategy.
It is how you plan to pay the loan back, which you may also need to prove.
In some cases relating to properties, most of the time, the property’s sale is the exit plan, and money from the sale is used to pay the loan back.
However, there are many different situations that a bridging loan is used for, so the plan for paying the loan back isn’t always straight forward.
The lender will need to see the plan and determine if it is strong enough and can trust that it will pay the loan back.
You may be required to show some documents of proof during your application process.
Especially for those that relate to properties, you may need to show proof of purchasing it first and what plans you have for the property.
The more evidence you present, the better it will be, and more likely it is to be approved.
What Is A Bridge Loan In The USA?
A bridge loan in the USA is a temporary loan that bridges the gap between a new house’s sales and a new mortgage.
To put that in more basic terms, you essentially borrow money for the down payment or deposit of a new home whilst waiting for your old house to sell.
In the USA, bridge loans are aimed more towards the sale of a property, rather than for other reasons.
Similar to a bridging loan in the UK, additional fees and bridge loan rates are added to the total fee to pay.
Key Features Of A Bridge Loan In The USA
Some of the key features of a bridge loan in the USA include:
- It enables people to purchase a new home or put down a deposit while waiting for their existing home to sell.
- Quick to receive large amounts of money
- Purchase a property with no restrictions
- Easy process and application
- Access to large amounts of money
What Is Needed For A Bridge Loan In The USA
For bridge loans in the USA, lenders require to check your credit history and financial history.
It is because they need to check what your financial history is like in terms of spending, repaying payments, etc. to determine if they are happy to accept the loan application.
As bridge loans in the USA are used for property purchases, once the existing home sells the money from the sale is used to pay the loan back.
So for bridge loans, most of the time, the security needed is already there as you will already have an existing property that is due to be sold.
This links in with the exit strategy as well, as the plan is that a new house is being bought, the old house is being sold, and therefore, the loan is paid back with the house sale money.
It’s a lot more straightforward and straightforward than bridging loans in the UK; however, you will still need to prove the plans you have and that it will pay the loan back.
Property Finance Partners is able to compare with the whole market to get you the best bridging loan rates in the UK. For more information on this and any other property finance solutions contact us on 020 3393 9277 or email [email protected]