What are the risks of a Bridging loan? Bridging Loans are are a Non Status Loan generally offered to property developers, landlords or people selling their home or buying a new home, all being well, there is little risk, but because of the unpredictable nature of buying and selling a property, delays and collapsed sales do happen, this is where bridging loans are used to keep the chain alive, this can be a godsend in order to carry on with the chain, however, there are risks associated with taking out bridging loans, you may not sell the property in time or be able to get the capital in order to clear the loan, property can take some time to sell and buyers fickle, complications can also arise for any number of reasons, in this scenario a borrower would first look to extend the loan for a further 6 months or arrange a re-bridge with another lender, lenders are usually happy to offer an extension if they can see a sale is progressing, however, they would not look to offer an extension after the first one.
The circumstances in which bridging finance is used can, therefore, leave borrowers short by the time the exit date comes around and should always bear this in mind when agreeing to take the loan you should always take the maximum term on offer to leave you enough time for unexpected situations that may occur.
For example, let’s say you’re selling your house with a view to buying your dream home and there is a chain involved.
A sale further along the chain collapse and thus delays your buyer from completing the sale of your house. You don’t want to risk losing your dream home because other buyers are interested to take out a bridging loan to resolve the situation, as stated always take the maximum term the lender is offering on the loan.
Ordinarily, you will eventually sell your house, pay back the bridging loan and everything is fine.
However, if the chain collapses again or your buyer pulls out, you have then left with an outstanding loan and no capital with which to pay it off, this is why if you are relying on a property sale to clear the loan you must price you property keenly to ensure you attract a buyer as soon as possible.
If you should happen to find yourself in such an uncomfortable situation, there are solutions. However, in some circumstances, the capital you need to pay off the loan may not be forthcoming in which case it is important that you contact the lender as soon as you are aware of a problem, lenders will work with borrowers to come up with an effective solution providing they are fully aware of the facts.
UK Bridging Loans are one of the UK’S leading bridging loan brokers and can search all of the loans on the market to source the perfect deal for your circumstances.
Contact us now to discuss your proposal and we can assure you of the very best advice and service, call us now 0800 138 6001 or use the contact form on this page to compare loans.
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