How Much Can You Borrow on a Bridging Loan
Bridging loans are forms of financing which are secured by an asset.
Also, it can be defined as a short-term debt product that requires an asset to be presented for the security of the loan. Just like hard money lenders, this is private lending; hence it is challenging to locate lenders who provide this service.
However, there are online websites dedicated to steering you in the right direction if you care to look or if you have a genuine interest.
Overview
Bridging loans are issued with a limited period of one to eighteen months. Upon expiry of the period, the loan is repayable in full amount. The loan, however, attracts monthly interests just like the other forms of financing; however, these monthly installments are not deductible on a monthly basis but are rolled on to the loan amount such that they are repayable at the end of the loan period.
With bridging loans, the client is assured of fast service. Loan processing only takes a couple of days between five and fourteen days, unlike 45 days for loans from conventional institutions like banks and credit unions.
Bridging loans can be secured by any asset as long as it is valuable. It can be secured with a car log book, land, business, house, commercial premises, etc. also, the borrower has the liberty to use the proceeds of the loan on a wide range of uses.
These uses include but not limited to purchasing a property below the market valuation, financing refurbishments, acquiring a property with short term validity on the market, preventing repossession of property, preventing foreclosure, etc.
In light of the above information, bridging loans are ideal for a client who is urgent for financing to solve time-sensitive property issues. The amount one may be eligible to borrow squarely depends on the borrower’s situation and a mix of a horde of other factors, which shall be discussed in the following segment.
Lender
Different lenders have different areas of specialization, adding to the fact that they are not easily located, make the mix even harder.
If you got a wrong lender for your deal, you may either be turned down for the financing, or be offered a little amount since the lender may not be well versed with risk assessment in your field of interest.
The brokers are better placed on locating a better bridging loan lender who has a practice in your area of interest. Therefore, the lender’s concern is an essential factor when determining the loan amount, you may be given.
Borrower’s financial situation
As much as these debts are financed on the back of asset security, the amount a lender may advance to a client is also determined by the borrower’s financial circumstances.
Say if the client has been declared bankrupt, then you may experience a difficult time trying to get a willing lender to give you a higher loan amount.
However, if you are in need of cash, you can increase the amount of collateral say land and a car to enhance your chances of qualifying for a higher bridging loans capacity.
Loan-to-value ratio
This Ratio is used by the lender to compare the value of your property that you are presenting as collateral against the amount of loan you are applying to receive.
Therefore, if the ratio is positive and with a higher margin, then you are eligible for a higher loan, and vice versa is true.
Value of the property
A highly valued asset will automatically qualify you for a higher loan limit.
If you are asking for a higher loan, then the lender will need a physical valuation of the property to be done so that it would be established the amount you qualify for.
Otherwise, if a desktop valuation is done, you may qualify for a higher amount with a property with a low market value.
Location of the property
Prime assets will rack you a hefty loan capacity. However, if you present an asset say in the rural parts of the country, then your loan limit may not be as high.
This is because the lender may need to sell the property in case you default on the loan repayment. Rural areas are not so easy to get a buyer.
Therefore, you may not get a lender willing to go all the way to these sides. And, if you get one, they may not be so open to approving hefty packages for you in the form of loans.
Type of the property
The type of asset you provide as collateral will equally determine the amount of financing you may receive. For instance, a car will definitely be costing less in eighteen months than its initial cost.
Therefore, when presented as security, the amount that it may be worth will be so little compared to a house or land which appreciates over time.
To maximize the chances of getting more amount of money from a bridging loan lender, provide property appraisals that are worth the amount you want to be advanced with.
The intention of the property
It helps to enhance chances of qualifying for more loan amounts if you divulge information about the property you may be acquiring or renovating. If the intention of the property is for commercial purposes, then you qualify for more than if the property is residential or for charity purposes.
The Bottom Line
Generally, there are no ceilings for bridging loans. Since these loans are not acquired under the protection of the laws governing financial integrity, they are not monitored.
Hence, the lender may advance any amount of credit to the borrower. Property developers, such as real estate dealers, can get up to 100% of the credit on the property since they are experienced.
With bridging loans, you can provide any given asset for the security of your loan. However, a higher valued property asset qualifies you a more upper loan limit.
One can also present collateral that is not yet acquired. For instance, you can offer a house under development as collateral as long as your equity in the property is sufficient to guarantee you a loan.
Besides, you can also present market shares and securities as collateral for a loan. Also, fine art, jewelry, pension, investment portfolios, etc. can be given for loan security. In case you need a loan, check https://www.instantloan.sg for more affordable
