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Bridging loan for divorce settlement?
It may be possible for an applicant to take a bridging loan if they need to pay for a divorce settlement and do not want to wait for an asset to sell.
A situation where somebody may do this is where there is a property that is to be sold and equity is shared amongst the owners.
If it seems that the selling process will take a long period, a person may consider bridging against this property, using the proceeds to pay off the person’s interests and then the remainder of the money when the property sells.
This is of course a risky way of settling the divorce as interest will continue to accumulate if the asset does not sell. As a result, this may lead to one person getting less money than they had originally planned.
The urgency in a transaction would likely determine whether this is a route to be considered or not. You should always take professional advice if you are considering bridging loans as it is an inexpensive way of borrowing.
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Is it a quick route to take a bridging loan for divorce settlement?
Generally, arranging and completing a bridging loan is a lot quicker than a mortgage, assuming that there are not too many conditions to be met.
In some situations, bridging loans can complete in a couple of weeks, so it is a fast way to arrange finance against the property.
If in the situation of a divorce, the number one priority is to raise money to pay off another’s ownership, this could be a solution for getting things done more quickly.
It will certainly not be suitable for everybody, but there are occasions where speed becomes the main priority and a bridging loan can be the preferred option. Your adviser would need to confirm this.
A mortgage advisor will also be able to provide a mortgage capacity report which is a document to aid a person going through a divorce or separation. The report explains what they may be able to borrow depending on certain situations.
What would be potential repayment methods for a bridging loan for divorce settlement?
If you take a bridging loan for a divorce settlement, you need to have a clear plan of how you will repay the bridging loan in the future.
During a divorce settlement, this would likely be for the sale of the property further down the line. The bridging loan may be taken to raise the money quickly to buy out another person’s interest in that property.
This is the last part of the divorce to be settled so the process can be finished. This may be a person’s priority. Later, the property could be sold with the proceeds going back to the sole owner.
Another method for repaying bridging loans is a remortgage.
In the situation where the applicant did not qualify for the full mortgage now but is expected to do so in the future, a bridging loan may be the solution to raise the money now and refinance it later.
If, for example, you have a limited company owner whose accounts were not strong enough to get the amount that they needed but could later submit another year of books with a much larger profit, this could be a way of refinancing the bridging loan once the new accounts have been submitted.
In this situation, it would be extremely important to take professional advice to make sure that you would be in a position to qualify for a mortgage in the future based on your expected earnings, to repay the bridging loan.
An experienced mortgage adviser would be able to help you.
Can you have adverse credit when taking a bridging loan for divorce settlement?
If you are taking a bridging loan for a divorce settlement, you can have adverse credit and still qualify for the bridging loan. Adverse credit can take many different forms such as defaults, arrears, debt management plans, bankruptcies, IVA or more.
Many bridging loan lenders are flexible on adverse credit as monthly payments are not usually made. Interest is retained separately from the loan and cleared at the end.
Different bridging loan lenders will have different rules around adverse credit so ask your adviser for more details.
If you are applying to remortgage the property to repay the bridging loan, you should make sure that your credit profile fits that of a standard mortgage lender and that you would qualify for a remortgage.
Speaking with a professional mortgage broker is always wise in any situation like this as bespoke advice should be taken.
Do you need a bridging adviser when taking a bridging loan for divorce settlement?
If you are thinking of taking a bridging loan for a divorce settlement, it would be wise to look for an experienced bridging loan adviser who can give you the advice that you need.
Bridging loans are a specialist type of finance and not every mortgage adviser has a vast amount of experience dealing with them.
You should always ask your adviser about their background to make sure that they have placed transactions similar to that of your own.
Is it expensive to take a bridging loan for a divorce settlement?
Taking a bridging loan for a divorce settlement is certainly not cheap, and may be one of the last resort if you cannot remortgage currently, or do not want to wait for a property to sell. Interest is retained on the loan with interest rates being higher than that of a mortgage. Fees can also add up with lender arrangement fees, broker fees, valuation fees, legal fees and sometimes even a fee to repay the loan.
You should talk to your bridging loan adviser who can give you a full breakdown of the fees involved so you can make a decision.
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Conclusion
It is certainly possible to take a bridging loan to pay for a divorce settlement. Bridging loans are not cheap so they may be the last resort.
If you are considering a bridging loan, make sure that you take professional advice so that you understand all of the costs and can be clear on your exit strategy. You should always make sure that your exit strategy is plausible to avoid being stuck on a bridging loan longer than necessary.
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