What Is A Bridging Loan? | Bridging Finance Explained | Flipping Houses UK #Finance

hey guys what is up it’s jack here again with another CashNews.co um and in this CashNews.co i want to talk to you and explain what are bridging Loans what is a bridging Loan um how does it work and should you use one so i’m just out for a

little stroll at the minute um as you can see it’s quite a nice quite nice view but um i’ve been getting a lot of people asking me um a lot of people asking me about bridging Loans how they work what they are what they mean and how to get one so in this CashNews.co i

thought i’d just quickly explain exactly that and go into a bit of detail about uh bridging Loans if i miss anything or if there’s anything that isn’t answered or if you’ve got any further questions about them please drop them in the comments below and i

would love to have a chat down there with you guys and answer any unanswered questions um in there just as a quick disclaimer i’m not a financial advisor i’m not a Broker i’m not kind of officially qualified to advise you on these things so what i would always

suggest is um speak to a mortgage Broker speak to a financial advisor somebody else if you are looking to go forward with this because they will be able to analyze your personal situation your financial situation and give you the best advice for you and your situation but having

said that i can give you some information about it and that’s what i’m planning on doing right now so to start with what is a bridging Loan a bridging Loan is a short term type of color: #1a73e8; text-decoration: none;">Finance short term high interest and so you picture it like it literally is a bridge it is basically a vehicle to get you from purchasing the property to finding a longer-term solution whether that be to get a mortgage on the property whether

that’s to sell the property whatever it is but it basically bridges you from the purchase through to the long-term solution that is in essence what a bridging Loan is second question is how do you get a bridging Loan so what i’d recommend is speaking to

a mortgage Broker asking around some Brokers near you and just saying hey do you work with bridging lenders um and if so have a conversation with them have a chat with them see if they can help you in any way but that’s what i was i would do i just quickly

google Brokers near me mortgage Brokers near me call them up and just say hey i’m looking at buying a house and i’m interested do you work with bridging lenders a lot of them do or will have someone in their company that do but just double check before

you kind of move forward with the company now how do they work and what are the fees involved this seems to be the thing that people really want to know um so firstly how do they work usually it’s a like i said it’s a short-term source of

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance so it’s a short-term solution so it’s usually around 1 to 18 months and that you would have a bridging Loan for because it’s short-term you pay your interest monthly that

interest rate is usually roughly uh between 0.5 and 1.5 percent per month so it is high interest quite often as well you will have to pay a set up fee and also in some cases an exit fee and these are around 1 2 usually around the 2 mark let’s say you borrowed 100 000 pounds and you paid a 1

interest per month and you also paid two percent on the entrance and the exit um that would mean that you end up paying two thousand two thousand plus six thousand you’d end up paying ten thousand pounds just on interest that’s what it could be anywhere that’s an example so yeah

it’s it’s high interest um it’s a high interest product now the ltv the maximum Loan to value that you’ll be able to get is typically around 75 percent that’s best case scenario usually i don’t know anyone who’s got higher ltv to that so if

you bought a house for 200 000 pounds you’d only be able to get a max of 150 000 pounds lent against it some bridging companies will actually lend you if you’re if you’re flipping a house if you’re refurbing a house they will actually lend you the full refurb costs or if

you’re developing property then you can sometimes get a lot of the development Finance funded but it’s but it’s case-by-case basis so you can’t

guarantee that that you can’t guarantee that that is going to happen and that is the case again just just speak to your Broker about that now there’s three ways to actually pay your interest and pay your bridging Loan um either you can pay firstly just

on a monthly basis and you pay your interest each month secondly this is quite common you will pay your interest rolled up which is really cool actually which basically means that your interest will be rolled up and you pay it all at the very end so if you pay one percent a month for six months

it’s at the end of the agreement that you would pay all your interest you pet you pay the Loan plus interest back so this is really helpful if you don’t have the best Cash Flow so rather than forking out you know one two thousand pounds every single

month you actually wait until the reFinance or the sale of the property um and so assuming that your deal stacks assuming you got your numbers right um you will be able to

pay back with the money that is either giving you given to you from the mortgage company or um from the money that you get from selling the property so it doesn’t have to come out of your bank every single month the um the third way of paying the interest is retained interest where the total

interest is deducted from the advance at the start guys if you find this information helpful make sure that you click the subscribe button it’d be great to have you part of the family um i’m i’m getting about 80 of my viewers not actually subscribed to my uh youtube channel so

make sure that you click the subscribe button click the bell notification so you don’t miss any uploads for future information and content just like this so if it’s interesting or if you’re finding it helpful click subscribe now it’s getting dark so i’m probably gonna

head back and get my dinner soon um but just finally the um the final thing i want to touch on is should you get a bridging Loan okay now i would say if you don’t have the cash to buy your deals up front and you don’t have investors to work with then yes definitely look

into bridging Loans i mean whether you have the cash to buy up front or not still look into it ask the questions see what’s available to you just because it’s worth knowing this stuff but i would personally i’m looking at buying cash because the interest is very

very high or working with investors just because i’d prefer to do that that’s just my personal preference now should you get a bridging Loan i would say yes if you are very confident in your numbers if you’ve had the training if you have the right education to be

able to find the right deals and to be able to manage refurbs on time so that they’ve done quickly um i mean i hear horror stories from loads of people who have got bridging Loans and they are unable to recolor: #1a73e8; text-decoration: none;">Finance are unable to sell a property and they are stuck with paying like one percent interest every single month and it’s just like a noose around their necks so because of the such high Interest Rates you’ve got to

make sure that you know your deal you know your numbers and then it fully stacks and that you are able to um complete and do the deal that you’re trying to do now the good thing about bridging Loans is the lenders because um they basically what they will do is they’ll

put a charge against the property so if you default if you can’t pay them they will just take the property off of you um which is why you will at max be able to get a 75 Loan to value because it’s such high Interest Rates that if someone defaults they

just want to be able to take the property and sell it off cheap to get their money back but what that means is that the bridging company will actually kind of do a bit of due diligence for you and check the numbers to see if it stacks um which is kind of cool they will actually check to see okay

yeah if they bought this and they spent this i can see how it could achieve this at the end however do not base your deals off of that you cannot base your deals off that you’ve got to know your numbers you’ve got to know your market you need to know the area you need to know um what

you can get for it you need to know what you’re going to have to spend on it in order to reach a certain value you’ve got to know that information guys you are responsible and it’s you who will get it in the neck and you’ll be in a real sticky situation if you get it wrong

hey guys i just jumped in the car and forgot to mention it’s kind of along the lines of what i was talking about but i just wanted to emphasize it because i didn’t want to miss the point um that actually your exit strategy is so so important when you’re looking at a deal okay this

is whether you’re using a bridging Loan or not but especially if you use you’re using a bridging Loan you’ve got to make sure that your exit is absolutely bang on okay what i mean by exit is when you buy a house okay let’s say that you are

looking to buy it do it up and sell it on okay so your exit strategy is to sell okay what happens if it doesn’t sell if it doesn’t sell you’re a bit stuck so you’ve got to have multiple exit strategies in mind before getting into a deal if it doesn’t stack for at least

two or three ways of exiting the deal then i wouldn’t do it like for me personally if i’m not happy with um if if if i’m doing a flip right and i can’t sell it if i’m not happy with the with refinancing it then i won’t do the deal okay um because your exit is

absolutely key and you cannot bet on just one exit working every single time so make sure that your exit strategy is bang on when you buy a deal work your way backwards start with the end in mind think about okay where is this going to go how can i exit on in multiple ways just to cover your back

just to make sure that you’re absolutely safe if it looks like you can’t sell and you reFinance but can still pay the bridging Loan back amazing

then that’s good that’s great um yeah essentially that was the point that was what i wanted to say it’s along the lines of what i was talking about but just make sure your exit strategy is one more than just one exit you’ve got a couple of exits in there and two make sure

that it’s bang on having said that um it’s a bit doom and gloom but having said that um bridging Loans are such a great tool for investing in property and doing a lot of projects at any one time um they are a great vehicle they’re like a tool in your toolbox that

you can use every now and then if it’s going to help you and benefit you to advance in your property flipping property investment buy refurbished Finance developments

whatever strategy you’re doing it will be able to help you advance in those areas um so like i said speak to a professional if um if you’re unsure if you have any questions drop them in the comments and i’d love to chat further if i’ve missed anything i do apologize but um

from my understanding from my knowledge of bridging Loans that’s that’s what i know i hope the CashNews.co has been really helpful make sure you click the subscribe button drop any questions in the comments like the CashNews.co and i will see you in the next CashNews.co

thanks guys foreign