Divorce Settlement: 3 Ways A Bridge Loan Can Help
Inevitably, marriages don't always go according to plan. And if you're going through a divorce, you may have to face some short term financial challenges on top of all the other strains associated with this difficult time. Expensive legal fees or the urgency to live separately while working through divorce can often leave couples in a financial bind.
This is where bridging finance can present a timely financial solution to help speed up divorce proceedings and enable divorcees to move forward with their separate lives with minimal disruption.
Here we explain how a bridging loan could benefit you during divorce, some important considerations and how to get the ball rolling if you would like to apply for one.
3 Ways a bridge loan can help during divorce
#1. To help pay for legal fees in the short term
Legal fees can mount up over the course of divorce proceedings, and it's not always possible to pay the bills until marital assets are divided up and, in some cases, sold.
A bridging loan can be used to raise a lump sum of money which can be used to pay solicitor or mediation fees in the short term. Many couples find peace of mind knowing they can pay their legal fees when they need to, and then the bridge loan is repaid when funds are released through the sale of assets such as a family home.
#2. To help pay for a new home while waiting for the family home to sell
A divorce bridging loan can be a solution for couples when living together is not preferable while waiting for the marital home to be sold - especially if this takes longer than expected. A bridge loan is a fast way to release capital from a property to enable one partner to move into rented accommodation or to use it as a deposit on purchasing an additional home.
#3. To Buy one partner out of a jointly-owned home
A bridging loan can also be used by one partner who wants to keep possession of the marital home, to buy an ex partner out. In many cases selling the marital home doesn't make sense, if it provides stability for children or if market conditions aren't favourable.
How does a bridging loan work?
- A bridging loan is short term finance normally offered for up to 12 months or less, although longer loan terms may be possible depending on the circumstances.
- Bridging finance can often be arranged in a short period of time, making it a perfect solution for couples who are keen to speed up new living arrangements in the wake of separation.
- Lenders require a sound exit strategy to be in place to repay the loan. Usually, this would either be a mortgage (or remortgaging) or the sale of the property.
- Because a bridge loan is secured against property, low income and poor credit history are not obstacles in most cases.
- Interest is normally charged monthly, but there is also the option to roll up the interest and pay it as a lump sum with the original amount borrowed at the end of the loan term.
- You only pay interest up until the point the loan is repaid and there are no early exit fees if you can settle the loan in a short space of time.
How much can I borrow with a bridge loan?
How much you can borrow will depend on your circumstances, the value of your property and whether you already have a first charge loan against it.
- You can borrow between £50k to £4M plus
- Up to 80% of the value of the property (sometimes more, on investment properties or in particular circumstances)
- Loan terms can be flexible from as short as one month or up to a year for a home loan (which may be extended)
- If you own a property valued at £500,000 with no mortgage on it, you could borrow up to 80% of its value, which is £400,000.
- If there is an outstanding first charge mortgage against the property of £200,000, then you may be able to borrow £200,000 as a divorce bridge loan.
How to apply for a Bridging loan?
Get expert advice on setting up short-term bridging finance quickly
There’s no shortcut to detailed market knowledge and a solid understanding of how the structure of bridging finance can suit individual circumstances - and this is especially important during divorce when faced with financial decisions you might not have planned for.
At Clifton Private Finance, our team of expert bridging loan brokers is on hand to discuss your situation and help you decide if a bridging loan is a right solution for you.
Book a free and no obligation telephone consultation at a convenient time for you:
Or call us now to talk to one of our expert bridging loan advisors now: 0117 959 5094