In This Article
What is a bridging loan agreement in principle?
An agreement in principle for a bridging loan, is where the scenario is presented to a bridging lender, for them to offer an initial decision. This may be by the way of indicative terms.
What the bridging lender considers to be an agreement in principle, will depend upon the lender themselves.
It usually means that they have been passed initial details by the applicant, or bridging loan broker, and run a credit check to view the applicant’s credit conduct.
This can result in a certificate coming back from the lender confirming that the bridging finance is agreed in principle.
This does not mean it is guaranteed in anyway as it will subject be subject to a full application, underwriting and assessment of the property or land.
A bridging loan broker will be able to arrange your agreement in principle to help you get an offer accepted.
You should always take professional advice when considering a bridging loan, as they are more expensive than conventional mortgages.
Make sure that you’re very clear on your exit strategy so you’re not stuck on an expensive bridging loan.
Your bridging loan broker will likely be a member of the National Association of Commercial Finance Brokers.
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Bridging loan indicative terms
Indicative terms show a potential borrower what bridging loan is being recommended based on the information so far.
These are usually provided by the broker to the client prior to a full application, or any underwriting being carried out.
They should tell the borrower what the interest rate is, the bridging loan arrangement fee, brokers fees, estimated legal fees, estimated valuation fees and more.
The figures may be subject to change if there are material changes following the issue of the indicative terms, or if a lender changes the products at all.
Your broker may also recommend a different product once they learn more about your situation, if I feel that there is a more suitable solution for you.
Getting indicative terms from a bridging loan broker will help to show your estate agent or vendor that you have explored your finance options and the talking to a professional.
If you would like I need advice to match you with a bridging loan broker that can offer you advice, issuing indicative terms, this can be arranged.
How will a bridging loan agreement in principle help me to get an offer accepted?
Getting an agreement in principle on your bridging loan will demonstrate to the estate agent or seller of the property, that you have explored your finance options.
If the transaction requires bridging finance due to urgency or the property state of repair, the sellers will want to know that you are a serious buyer.
Being able to demonstrate you have spoken to a bridging finance professional who has sourced indicative terms, may increase confidence in a better chance of getting the offer accepted.
Should I be using a broker for my bridging loan?
It’s always recommended to take professional financial advice if you are considering a bridging loan.
Interest rates on bridging loans are generally high, and the loans roll up if you are not servicing the interest monthly. This eats away at equity within the property.
As a result, it is important that you only take bridging finance if you fully understand the risks, and have explored your other options.
You should look into whether a standard term mortgage is available to you, as this may be lower risk due to the interest rates being less than a bridging loan.
If you are talking to a bridging loan broker about a transaction, you should also seek advice from an experienced mortgage adviser about a potential term mortgage, to be clear on your options.
Make sure that you tell your financial adviser your full situation and future plans, so they can make a recommendation bespoke to your circumstances.
Will I need to pay for a bridging loan agreement in principle?
Most bridging loan brokers will not charge you a fee for getting you an agreement in principle. There may be fees payable for the next stage, for example, a commitment fee for a full bridging loan application.
Make sure that you are fully aware of your broker’s fee structure, and what will be payable throughout the transaction.
Bridging loans can incur many fees such as broker commitment fees, broker completion fees, valuations, arrangement fees, legal fees and more.
Find these out early to factor them into your projections when assessing the profitability of your transaction.
Conclusion
If you are thinking of taking a bridging loan, you should talk to a qualified bridging loan adviser early, to give you the best chance of getting your offer accepted.
Being able to show the seller or estate agent that you have an agreement in principle or professional terms for your bridging loan, may give them more confidence in accepting your offer over others.
Always do your due diligence when you were taking a bridging loan and look into other alternatives too, such a standard mortgages.
You should seek the advice of a qualified professional who can tell you your options.
If you would like I NEED ADVICE to match you with an adviser that can assess what is possible, and arrange a bridging loan agreement in principle if needed, please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
