Many people consider remortgaging after a bridging loan. A big benefit of taking out bridging loans UK as it helps you effectively act as a cash buyer when there’s a property on the market that you don’t want to miss out on.
A problem many buyers face is that they need to complete property purchases before they get approval on their mortgage application. A bridging loan can solve this problem and give you access to the funds you need within just a week so the deal can go through. Once you have completed the purchase, you can then get your mortgage approval and repay your loan within a year. If you pay your bridging loan off early, you’ll only need to pay interest for the period you were using rather than the whole 12 months.
Let’s take a closer look at the topic of remortgaging after a bridging loan so you can decide whether this option is right for you.
Paying off a bridging loan by remortgaging
Bridge loans are often used by people who need funds quickly so they can complete the purchase of a property. It’s become rather common for people to take out bridge loans and apply for mortgages to repay them afterwards. If this is something that you’re interested in, it’s wise to explore your options and assess your circumstances in depth to make sure it’s the right decision for your needs.
Why would I need to remortgage after using a bridge loan?
To pay off the bridging loan
Bridge loans normally have to be paid back within 12 months, which means you’ll have to refinance after you’ve paid one off unless your sell the property. Bridge or bridging loans give you access to temporary finance whilst you’re arranging a long-term solution.
You can repay the bridge loan by securing a traditional mortgage, which will give you lower interest rates as well as more manageable repayment terms. Bridge loans normally have higher interest rates than standard mortgages, so they can reduce your monthly repayments and the cost of borrowing.
Access to additional funds
You may also gain access to extra funds when remortgaging if the value of your property has risen. You could use this cash for renovations, investments or other costs. This could be a great option if you used your bridge loan to cover the initial purchase and want to release more equity.
You might also be able to get a better deal on a mortgage if your financial situation has got better or your credit rating has improved since you first took out your bridge loan. This could mean getting better rates and terms.
To invest in more property
Many landlords and property investors have used to bridge to let for buy-to-let properties. It’s common for them to pay the loans back via remortgaging their properties and the income they get from tenants.
Common questions
How soon can I remortgage after a bridge loan?
If you used a bridge loan to buy a property, you’d normally need to wait up between six to 12 months to remortgage after you took the loan out. This delay can be problematic if you used remortgaging as the main part of your exit strategy as it can mean not being able to access the money until the end of the bridge loan agreement. Nonetheless, in some cases, you might be able to remortgage much earlier if you live in the property. Read more here about Bridging loan exit strategies
Is it hard to remortgage after a bridge loan?
Some mortgage lenders are more accommodating than others when properties have been funded through bridge loans as they could see you as a high-risk borrower. The criteria for remortgaging can vary wildly from one lender to another, so don’t be too downhearted if your application is turned down as another may approve you.
Who can advise me on remortgaging after a bridging loan?
If you are considering remortgaging after taking out a bridging loan, it’s very wise to seek out advice from finance experts. At Bridge Loan Direct, we have a great deal of experience when it comes to bridge loan remortgaging. We can help you come to the right decision on whether this option is a suitable one for you and your circumstances. We have 35 years of collective experience behind us.
Do I need to stay with the current lender?
If you want to remortgage the property you’ve used the bridge loan to buy, doing so with your current lender could speed up the process. However, you might not get the best rates if you pursue this option so it’s always best to spend time shopping around to get the best deal.
Can a bridge loan damage my credit score more than other kinds of lending?
A bridge loan can have a bigger impact on your credit rating than other finance options as it’s regarded as a high-risk loan. However, this certainly doesn’t mean it’s impossible for people to remortgage after they’ve taken out bridge loan finance.
Why might an application for remortgaging after a bridge loan be turned down?
Your application to remortgage following a bridge loan could be rejected for reasons such as your credit history, debt-to-income ratio and income. You may also struggle to get approval if there’s little equity in your home.
Now you’ve learned mow about remortgaging after a bridge loan, check your loan costs today to find out how much a loan from one of our trusted lenders is likely to cost?
Credit history
You could be turned down if you have a poor credit score and the lender predicts you won’t be able to keep up with repayments. Mortgage lenders can be particularly strict when it comes to your credit rating compared to other types of lenders.
Debt-to-income ratio
Remortgaging can help you consolidate your debts, but you may find it hard to get approved if you have too many. This is why it’s such a good idea to pay down your debts as much as possible before you make your application.
Your employment situation
Your current employment situation and income may also be taken into consideration when you’re applying to remortgage. Self-employment and being on a low income can make it difficult to remortgage after a bridge loan, as can an unstable employment history.
Poor equity
You could be turned down if there isn’t currently sufficient equity in the property that you want to remortgage.
