Will a bridging loan affect my mortgage application?
It’s very common for people to wonder “will a bridging loan affect my mortgage application?” when they are thinking of applying for this kind of finance. Bridge finance does come with many benefits, but it isn’t for everyone. In this guide, we’ll give you the information that you need so you can come to an informed decision on taking out a bridge loan when you’re planning on applying for a mortgage.
The impact of a bridge loan on a mortgage application
It’s important to know that a bridge loan can have an impact on your mortgage application. However, it’s only likely to have an effect if you apply before you’ve repaid your bridge loan. Any debt that you currently have can have an impact when you’re applying for a mortgage. If you do have outstanding debt but want to take out a bridging loan, an experienced financial advisor or broker can provide bespoke advice tailored to your situation.
Reasons why mortgage applications get turned down
Mortgage applications can be rejected for a host of reasons. People’s mortgage applications can be turned down because their debt-to-income ratio is too high or because they are applying for a second charge mortgage and they don’t have enough equity built up. An unstable income and a poor credit history can also cause mortgage applications to be rejected.
Can a broker help when I want to take out a mortgage?
There are many brokers on the market that specialise in helping people looking for bad credit bridging loans who want to take out mortgages or bridging loans to purchase properties. Many bridging loans are specifically designed for people with bad credit who have valuable assets that they can secure loans against. Learn more here about, how bad credit affects bridging loan approval
Why buy a property with a bridge loan rather than a mortgage?
People use bridging loans to buy properties rather than conventional mortgages for many reasons. These can include being turned down for mortgages or when they want to buy a property that’s unlikely to be on the market for very long. A bridge loan can essentially turn you into a cash buyer so you don’t have to miss out on a property that you really want to purchase.
Mortgages can take a very long time to arrange compared to bridging loans, which can sometimes be arranged within a few days or weeks. If you have a strong and convincing exit strategy for repaying a bridge loan with the agreed term, there’s a very good chance that you could be accepted. Your exit strategy could involve receiving money from a property you’re selling or a windfall from another source. Bridging loans are designed to ‘bridge the gap’ between purchasing something and receiving money from elsewhere so you don’t need to put your plans on hold. Many people cover the cost of properties with bridge loans then refinance them with mortgages once these loans have been repaid.
What criteria will a bridge loan lender look at when assessing my application?
Bridging loan lenders consider similar criteria to mortgage lenders when deciding whether to approve an application. These include the amount of money you want to borrow, what type of property it is, where it is located and the size of your deposit. The amount of equity you have in the property you plan to sell will also a big influence on their decision.
Some of the key differences between bridge loans and mortgages are that you’ll normally only have 12 months to repay the former, and you won’t be penalised for early repayment. There are some fees you’ll need to cover, but you’ll only pay interest for the time you’re actually using the loan.
More about bridge loans
A bridge loan will show on your credit report just like other kinds of finance. It’s important that these loans are featured on credit reports so lenders can see how well you have managed debt in the past. Without this kind of information, it’s much harder to lenders to feel confident about your ability to pay them back.
Bridge loans normally last for 12 months, but they can last for longer in some circumstances. Some lenders specialise in offering longer agreements. The amount that you’ll pay to take out this kind of finance can depend on a range of factors, and these include the among you’re borrowing, your income and your credit history. Bridge loan lenders do tend to charge more interest in comparison to other forms of lending, but many borrows are happy to pay a little more to benefit from the flexibility and convenience that they offer.
Although a bridging loan can affect your application for a mortgage, paying it back on time can be very healthy for your credit score and make it easier to get accepted for a mortgage later.
Who can help if I want to take out a bridging loan?
At Bridge Loan Direct, we can help if you have been asking “will a bridging loan affect my mortgage application?” and are interested in applying for this kind of finance. We have been a leading force in the industry for many years and can be there for you every step of the way. We have a great deal of experience in helping those with lower credit scores to access finance and are proud to offer an impartial service. We favour no lender over any other and always do the best we can to get you the best possible deal.
We have access to a panel of more than 300 lenders, which is one of the reasons why we’ve become so effective at arranging finance for such a wide range of clients.
