As mortgages and bridging loans are both associated with the property market, it’s often they get confused with one another.
To a large extent, both finance options follow the same processes and it’s no surprise why people new to the sector are confused about the variations. However, there are numerous ways in which both the loans differ, at Velocity Bridging we have listed what we think are the most significant differences:
Age requirements: Generally speaking, there is no age limitation when applying for a bridging loan, but mortgages – because they are often dependent on a 20+ year repayment schedule – require a younger borrower and it’s rare for someone to obtain a mortgage once they hit 50 or over.
Personal and commercial terms: As a rule, mortgages are obtained by individuals, friends or couples, while bridging loans can be obtained by a limited company or an individual.
Repayment period: A mortgage is generally arranged for a longer period than a bridging loan and typically, lenders have a minimum term of five years. Whereas borrowers will usually apply for a bridging loan for a short-term arrangement, and it can be organised and finalised in less than a month. At Velocity Bridging, we are especially proud to offer a 3 working day completion on our bridging loans.
Credit history: Unlike mortgages which are primarily allocated to someone because of their wage or credit history, bridging loans aren’t usually denied because of a borrower’s income or credit score. This means those on a lower salary have a greater likelihood of securing a bridging loan, although income will always be considered by responsible lenders like Velocity Bridging.
Repayment factors: Bridging loans are often repaid via the resale of the property purchased whereas mortgages are given to a borrower based on many other factors, including a person’s income, deposit amount, credit history and the number of dependents they have.
Exit fees: Usually if you have the ability to pay off your mortgage before the agreement period, then there will be a penalty payment, but because most bridging loans are organised with no exit fees in place, it means they can be paid back during the agreed term.
If you have any questions about bridging loans or if you want to discuss your loan options, get in touch with Velocity Bridging on 01704 339588 or info@velocitybridging.com so you can get a tailor-made loan directly for your purposes.