Closed bridging loans are short-term deals that have a fixed repayment date. There are a number of reasons for using them, and this article will explore them:
Lower interest rates
Interest payments on closed bridging finance will usually be lower than open bridging finance, as the latter has no fixed repayment date. Lenders feel that there is a degree of certainty about the loan repayment on closed bridging loans and tend to regard them as lower risk.
Provided you are certain that you will be able to make the loan repayment on the specified date, closed bridging finance should be your preferred option.
Better chance of approval
As closed bridging loans are perceived as lower risk than open ones, closed bridging applications get the OK from lenders more often.
Waiting for long-term finance
The most common need for closed bridging finance is when waiting for long term finance. When applying for a long-term mortgage, the exact date when the funds will be available may be known. A bridging loan can be used to complete the purchase of property quickly, and then repaid on the day the mortgage is ready.
Purchasing a house and selling an existing one
A purchaser often needs to sell their existing house in order to pay for a new one. If a buyer has been found for the existing house and a definite completion date has been formalised, a closed bridging loan can be taken out to buy the new house quickly. The loan can be repaid on the completion day of the sale of the existing home.
Closed bridging loans can be used shrewdly for the purchase of commercial property. A business moving to new premises and selling its existing building can use a closed bridging loan provided that they have fixed completion dates for both the old and new building transactions.
Bridging loans can be used by partnerships and limited companies as well as individuals.
Speed and loan length
Both closed and open bridging loans are quick to arrange. Normally, there is no speed advantage for using closed bridging loans.
All bridging lending is for short-term use, with the average term being six to seven months. Unlike standard mortgages, there is usually no penalty for repaying the bridging loan early. A closed bridging loan with a fixed repayment date can still be paid off early if funds become available, and it is also possible to use a lump sum to partially repay the closed bridging loan before the date when it must be repaid in full. This will save on interest payments.
Applying for a closed bridging loan
The first step to applying for a closed bridging finance is to talk to Ascot Mortgages. We can assess your loan application and normally provide a provisional loan offer in less than a day. We have long relationships with a number of bridging finance providers and can find the most competitive deal to suit your individual circumstances.