The loan is usually structured to be repaid within a short period, often within 12 months, aligning with the timeframe required to sell an existing property or secure permanent finance. Interest rates are typically higher, reflecting the shorter term and increased risk assumed by the lender.
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This specialist finance solution acts as a temporary bridge, covering the gap between the purchase price and the long-term funding you plan to secure later. It is crucial to calculate the total cost of borrowing to ensure the profit margin, if you are developing the property, is sufficient to cover the finance charges.
Lenders will want to see your exit strategy, which usually involves one of two scenarios. Lenders place greater emphasis on the property's value and exit plan than on the borrower's credit history.
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Additionally, arrangement fees, valuation fees, and legal costs can add up. Being organized and transparent during this stage significantly increases your chances of a smooth and timely approval.
More About Auction bridging loan
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