Both short-term and long-term lenders working closely with brokers
Many borrowers are taking out short-term bridging loans until more long-term finance is available.
A typical example of this is when a bridging loan is used to complete a property purchase while waiting for an existing property to sell. When the old home has been sold, the bridging loan can be repaid and a mortgage arranged for the new house.
If the same broker is used for the bridging finance and the mortgage, they can collaborate with both lenders to make sure that the mortgage funds are available as soon as the bridging loan has been repaid.
A broker can help borrowers satisfy the different lending criteria for each type of loan. A bridging finance lender’s main concern is whether the borrower can pay back the loan within a short period of time, so they examine the exit strategy, which is the plan for when the loan will be repaid and where the money is coming from to make the repayment. For the bridging lender, the exit strategy is usually more important than the credit history of the loan applicant.
A mortgage lender is concerned about the long-term ability to keep up with monthly mortgage repayments, which could be over 10 to 20 years. They look much more closely at the credit history and salary of the borrower.
Many borrowers say mortgage delays are the reason for needing a bridging loan. A good broker will be able to find both a bridging loan and a mortgage that best suits their client.