Should I just go with the cheapest rate?
All things being equal, you probably should go for the cheapest rate. Who wouldn’t?
However, when are all things ever equal? It is very rare and in lending it is scarcely the case. There are so many variables to consider when choosing a product. If we look at a refurb bridge as a case in point, there are numerous details that need to be evaluated:
- Lender fee
- Admin fee
- Interest rolled, serviced, or retained
- Tranche drawdowns
- Legal costs
- Valuation costs
- Monitoring surveyor costs
- Default rates (this is very important)
These are just an example of the items in indicative terms that you need to look out for. A rate may seem competitive on the surface but the overall package may work out more costly. Furthermore, especially if you are a property novice, how sure are you that you will complete your project within the timescales?
At the time of writing, there is one lender charging 5% if you are a day late. Rates can seem attractive but they are not the full picture.
Compare quotations and potential costs in different scenarios. The most important thing is to be prudent and careful when entering into any financial transaction.