Bridging loans are a popular short-term financial solution that can be used for various reasons, extending a lease on a property being one of the uses.
What Is A Bridging Loan For Lease Extension?
A bridging loan for a lease extension is a short-term loan to pay for a property’s lease extension.
If you’re a leaseholder, you own the property but not the land it comes on, and therefore, you’re leasing it from the landlord.
With leases on a property, you have the opportunity to extend them for several years, which at this time, you can pay the mortgage off for the property.
The bridging loan for a lease extension gives you a large amount of money to pay for a lease extension on the property.
How Does A Bridging Loan For Lease Extension Work?
The way a bridging loan for lease extension works is just like any other bridging loan.
You apply for a bridging loan through a lender and, once approved, receive the money to use for the lease extension.
It may be harder to find a lender who is willing to work with you for the purpose that the money being borrowed is being used for a lease extension, but with plenty on the market, you’ll be able to find a suitable one for you.
Below is the application process for a bridging loan for lease extension:
- Find a lender-
The first step is to find a lender that will offer a bridging loan for a lease extension. Always look around at different lenders, as some will offer better rates and services than others. Also, make sure to compare different lenders to make sure you’re getting a reasonable rate.
- Application process-
Once you’ve found a lender for a bridging loan for a lease extension, you can then enter the application process.
Like any bridging loan, you will need to go through an application process to apply for the loan. During this, you will have a valuation on the property, what the money will be used for, equity in security, and your exit strategy.
From this, the lender will decide if they’re happy to lend you money and, if so, how much they are willing to lend, based on the equity you have in security.
When you have gone through the application process and the lender is happy to give you the bridging loan for a lease extension, you will agree on payment terms: how long it will take to pay the money and how you will pay the loan back. Once this has all been agreed upon, you should receive the money within 7-10 working days, which can then be used for the lease extension.
It’s a quick and straightforward process to go through, and bridging loans for a lease extension is a great way to get money quickly to use for the lease extension.
How Much Can You Borrow?
With a bridging loan for a lease extension, lenders will usually give out about 75% of the property value. Starting from around £25,000 with no maximum limit, so you can ensure you can borrow enough to pay for the lease extension.
How Much Does It Cost?
Bridging loans for lease extension are a bit more flexible, and rates can start from around 0.44% per month. With this type of loan, the interest can be added to the loan, rather than a monthly payment.
On top of the interest paid, additional fees are added on that most lenders will charge. Valuation fees, arrangement fees, and legal fees will always be added to the lender’s loan. Some lenders may also charge for things such as an exit fee.
However, not all lenders will charge for things like this. This is something to think about when looking for lenders to see what their rates are like and what additional fees they charge as extra, as you may be able to avoid paying some of the fees.
How To Extend Property Leases
To first extend a lease using a bridging loan, you need to be classified as a leaseholder, which you will have to prove. To extend the lease, you will need to have owned the property on a long lease for at least two years.
There will also need to be a notice given to the freeholder of the property’s land and an agreement that you plan to extend the lease on the property. Once this is all approved, you can go ahead and start the lease extension. This can be quite tricky to do, so it is advised to seek legal and expert advice to know exactly what to do.
Bridging loans for a lease extension is an excellent way to get a short-term loan and a large amount of money quickly to pay for a lease extension.
The loan can be paid back by remortgaging the property or even selling it, so there are exit strategies available for doing this.
Always make sure to look at different lenders when getting a bridging loan for a lease extension, as some specialise in this, so are likely to give you a good deal. No matter what a bridging loan is being used for, there will always be additional fees and interest rates along-side the loan to be paid back.
The bridging loan for lease extension can be used to help pay for the extension of the lease. With being a leaseholder, you lease the land the property is on for a set number of years, which can be anything from 40 years to 90 years.
This is where you can extend the lease on the property and then be able to pay the mortgage on the property. A bridging loan can help you with the money to be able to get the lease extension in the first place and be able to secure it.