Connecticut Bridge Loans: A Guide to Applying for Bridge Loans

Companies / Debt & Loans Oct 31, 2022 - 10:09 PM GMT

Connecticut bridge loans is gaining more and more attention among homeowners especially those that need quick access to funds to purchase a new house. Many people are starting to investigate the bridging loan market, and to help those who are new to this market, we’ve come up with a simple guide to help them understand bridging finance.

Understanding the Bridging Loans Market

Bridge loans are short-term loans (usually around 1 to 6 months) that are secured against property a first to second charge basis. This type of loan is secured against property; they are usually non-status and requires no credit checks or proof of income to apply for one.

The amount of the loan can be 100% of the property’s purchase price, or usually around 70% of the property’s value. The property can either be a residential, investment or commercial property or land.

If there is enough equity in the property, the interest for the loan and other fees can be collected and settled at the end of the loan’s term. Interest rates for Connecticut bridge loans mirror the risk to the lender and the Loan to Value (LTV) of the loan against the property. The higher the LTV, the higher the interest rates are.

You can apply bridge loans through some high street banks, private financing companies, or through specialist bridge loan brokers. High street banks are usually more conservative when it comes to lending, while private financing companies are quick and focus less on previous credit problems and proof of income. But private financing companies are not usually accessible by the public who have to apply to them through brokers.

Why Apply for Bridge Loans?

There are plenty of reasons why people apply for bridge loans, but it normally has something to do with how fast they can get access to money they need. Bridge loans can be arranged in a matter of days. Below are some of the reasons why people use bridge loans:

Buying property at an auction where you are required to pay it within 28 days
Buying property undervalue where the vendor or selling is looking for a quick sale
Problems with short term cash flow
Complete house purchase when current or existing property is still unsold
Stop house possession
To settle tax or VAT liabilities
To raise money/cash for divorce settlements
To raise money for any legal reasons/procedures

The costs involved in applying for a bridge loan can be quite expensive and can include any or all of the following:

The borrower has to pay for the cost of the property’s RICS survey. The price will depend on the property’s value. The higher the value, the higher the valuation fee. A commercial valuation is usually more expensive compared to a residential valuation.
The borrower pays for their legal costs and also to the lender’s legal costs.
The start the loan, you need an arrangement fee that costs around 1% to 2% of the loan amount. This cannot be added beyond the maximum LTV of the product. You might also be required to pay an exit fee payable only when the loan is redeemed. Exit fees usually start at one month’s interest.
There is usually a minimum term for the loan, which is three months for some loans down to one day for some. This is not an issue if the loan will be for three months or more.

You can avoid or reduce all these costs by choosing the right loans for your situation or for what applies to your circumstances.

How to Apply for Bridge Loans

Thinking of applying for a bridge loan but don’t know how to start? Well, don’t worry. We’ll show you how to get started.

You can apply for a Connecticut bridge loans through traditional banks or specialist bridging finance lenders. Many specialist bridging finance lenders do not accept direct applications and will only accept bridge loan applications through a broker or agent. Traditional bank rates may be lower compared to specialist lenders, but they do not get approved as quickly. In some cases, bridge loan applications via traditional banking institutions can take around six weeks or more before they can be completed. Specialist bridging finance lenders, on the other hand, can get you the funds you need within 10 working days, or within days so long as there is an acceptable valuation provided.

If you decide to go to a traditional bank for your bridge loans, most high street banks will provide you with some sort of bridging finance. You can file and submit your applications directly to the bank or through a bridge loan broker.

Another option is to hire a bridge loan broker to file and submit your application in your stead. Brokers will apply to the lender they think will suit you the most, especially for your circumstances. The decision on which lender to approach is highly dependent on your specific circumstances, which means that the lowest interest rate may not be the most beneficial overall for the term of your loan. There are several factors that can affect this including maximum loan size, whether there is a minimum term, and whether there are exit fees once the loan ends.

What might appear cheap at first glance may not at all be cheap once you calculate all the costs. This is the reason why it makes sense to avail the services of a specialist bridge loan broker. Even though they might charge broker fees, but you’ll end up saving money overall.

Conclusion

Connecticut bridge loans are commonly used when homeowners want to purchase a house or property after selling their current property. Borrowers can use part of their bridge loans to pay off their current mortgage and use the rest as a down payment on a new home. There are many reasons why people apply for bridge loans. The process of applying bridge loans is easy, and you have several options for applying as well. Working with a bridge loan broker, however, will make things easier for you.

By Sumeet Manhas

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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