Broker guide: Bridging loan exits

When your client takes out a bridging loan it is important to consider how they will make their repayments…

Section: Broker Guides

When your client takes out a bridging loan it is important to consider how they will make their repayments.

These repayments are always made clear to the client in their loan agreement. Although each agreement is different, there are a few common factors to be aware of. Let us explain.

Exit strategy

How do they intend to raise the funds and pay off the loan? There are two main considerations.

First: A clear and concise approach improves their chances of securing that important loan.

Second: Unless specifically agreed in advance, the maximum term they can expect is 18 months (from Affirmative). Other bridging companies only have the ability to offer 12 months as a maximum term.

So right from the time of the application, it is important to have a clear idea of how the client  is going to repay.

Example: sale of a property

Key factors to consider:

Does the client intend to market the property with local agents?

Have they received advice as to how long the marketing process will take?

Do they have evidence to support your assumptions of the end value if you are refurbishing or developing the property?

Do they have a buyer lined up and if so how quickly can they proceed?

Are they placing the property into an auction?

Remember to add time as a contingency plan for unexpected delays.

Interest and monthly payments

Some bridging loans are structured so that the borrower pays interest each month. But other structures, such as retained interest, allow you to deal with the interest as a part of the loan:

Monthly interest

Rates typically start from 1% per month.

For example: If they borrow £250,000 at a rate of 1%, they would pay £2,500 in interest a month.

Retained interest

To help them meet payments we can retain monthly interest from the loan.

For example: A £100,000 loan with interest at 1% would be £12,000 interest over a 12-month period. Retaining that from the loan would give them £88,000 on completion of the loan transaction.

Find more information about interest payments.

How does a client apply?

Read over the products and costs, then make a free application. They can borrow £10,000 to £5m. LTV rates up to 75%. Interest rates from 1% per month. Our record is four hours from start to finish.

Attributed to Affirmative Finance,  For more information call the Manchester office today on 08701 123 11108701 123 111.

 

Keywords: affirmative bridging, bridging loan, broker guide, bridging and commercial

Source: Bridging & Commercial — https://bridgingandcommercial.co.uk/broker-guide-bridging-loan-exits