Cost of Bridging loans
Arranging bridging loans is normally more expensive than traditional mortgages. A bridging loan is normally a short term option to fund an Investment Property and on average, lasts just a few months, whilst a mortgage can last up to 25 years.
Different bridging lenders will have their own rates and it is wise to analyse the rates of each lender carefully. A lower interest rate will not automatically mean a better deal. There would normally be other costs associated with the finance, which include some of the following:
Arrangement fee by the lender
Lenders fees vary between lenders and you can expect to pay between 1% or 2%. The payment of the fee also caries with lenders; in a majority of the cases the lender will expect to get paid upon completion and deducted from the loan, although some will ask to be paid upfront.
Lenders Solicitors Fees
These are fees incurred by the lender from the solicitors and will vary between lenders.
The interest rates are agreed as per case basis and usually range between 1% and 2% per month. Fees on second charge properties is higher and can go up to 2.25%.
Redemption or Exit Fee
This is the charge that you should carefully look at to see if you are getting a good deal. Some lenders will charge this fee but offer lower monthly interest rates and some will not charge, but offer higher rates. The charging of the fees also depends on the duration of the loan. If you have the loan for a long enough period, the fee will not be charged.
Some brokers will charge a fee, whereas some will not. It depends on the agreement that the broker has with the lender.
Like traditional mortgage lending, the lender will require a survey to be done on the property for security. A survey may be wavered if you have already had one done and is acceptable by the lender