Sunday, September 28, 2008

What Will Happen After Your Bridging Loan Term Ends?

In today's market if you take out a Bridging Loan make sure the term is realistic, even pessimistic. If you do not, the lender may not automatically extend the term, or if they do it may be on double the interest rate. They could even apply for repossession of the property.

To make matters worse you will find that a lot of Bridging Loan providers will not refinance where the existing loan is a Bridging Loan. Why is this? The reason given is that if you have not arranged your exit route in the term of the loan, then either no one will buy your loan or no lender will lend to you. In the current market conditions this may not be completely true, maybe your lender has with drawn the deal you were applying for or there are fewer buyers in the market.

Fortunately there are some lenders who will refinance a loan where the lender is a Bridging Loan provider, but the amount of choice available to you will be greatly reduced even at a modest loan amount compared to the value of your property (LTV loan to value). There will also be new arrangement fees, legal fees and valuation fees to pay. The monthly rate you now have to pay could be higher than previous as your choice is now limited.

It is essential to be realistic about the repayment of the loan especially as the loan term nears its end. It is better to approach the lender well before the end of the term to ask if they will extend the term. If your exit route is due to complete just after the end of the bridging loan term your lender may extend the term to this date, if not then you will have to arrange to refinance your loan with another lender.

It should be remembered that although you could have an existing valuation for your property, this may not be acceptable to a new lender either because the valuation is more than 3 months old or the valuer is not on your new lenders panel.

If you are in the unfortunate position of having to refinance an existing Bridging Loan, contact a Bridging Loan Broker to discuss the options open to you. For more information visit Meta Bridging Loans

So remember if you take out a Bridging Loan make sure the loan is for sufficient time to allow for your worst repayment scenario.

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