What are the mechanics of a bridging loan and what should the consumer concern themselves with? The often advised considerations of a bridging loan are to confirm the rate payable, depending on charge type anything between .95% on first charge upwards to 1.75% on second charge and/or blended rate. Since Mday (31/10/2004) within the United Kingdom and the involvement of the FSA all charges will be clearly identified within a KFI (Key Features Illustration). There will undoubtedly be an arrangement fee of anything between 1 to 1.5% of the loan advance, however the consumer must be advised and be made aware of any ‘exit’ fees. What is also commonly overlooked by the consumer and homeowner and a vital pre requisite is an identifiable exit route out of the agreement.
Closed bridging finance is available to homeowners who have already exchanged on their intended purchase property, should completion after exchange be a drawn out affair the homeowner has the peace of mind that their property will sale i.e. an identifiable exit route.
Open bridging finance is far more high risk for the homeowner and should not be entered into lightly. This type of bridging is...