Short term finance secured on property
How does bridging finance work?
A bridging loan is a short term loan, secured against property. Used for a variety of situations, typically for speed or to finance an unmortgageable property.
Interest is typically part of the loan so that there are no required payments during the term.
Uses for bridging finance
Bridging finance can be used for a number of issues which make a regular term mortgage unsuitable; time-sensitive purchases (especially auctions), refurbishments, conversions, chain-break funding and downsizing, raising funds for business purposes and below market value transactions.
What can a bridging loan be used for?
Auction purchase and other immediate requirements
Purchasing at auction generally requires a completion within 28 days of the auction date. You’ll have put a deposit down on the day, from then on your funding and legal teams need to work together to ensure completion on the required date.
By using our auction finance specialist panel we can work with funders who will work fast to complete when you need to.
If you are raising funds for a business or other reasons time can still be of the essence – in these situations it’s vital to discuss your needs with our experts so that you can avert a business issue or take advantage of a great opportunity.
Costs and interest rates for bridging loans
Using bridging loans for house purchase or commercial premises needing refurbishment will allow you time to complete works on the property before letting, selling or occupying yourself. As the value is likely to increase following refurbishment a refinance should be possible on the completed value.
Lenders will lend against the purchase price of the property and some will also allow drawdowns against work done in the same way as a development loan.
Finance to convert a property
Conversion can be an effective means to profit from property. Property developers have long been completing stunning barn conversions, converting office blocks into apartments or smaller shops into housing or flats.
You’ll need to work with a lender with the flexibility to allow drawdowns when you need them and to fund the purchase and works.
Our panel of specialist property conversion lenders will ensure you get the funding you need, just when you need it.
Getting the property you want
Long chains in your buying (and selling) process can cause huge problems and anxiety for everyone concerned. Chains are also amongst the most common causes of lost sales.
By using a bridging loan the new property can be purchased before the sale the existing property completes. Although there is a cost implication this means that you don’t lose your dream home, you are able to take advantage of market opportunties and potentially, by completing quicker, negotiate a lower purchase price.
Funding your business
Bridging finance is used in a number of business situations outside the typical property business. Being able to arrange finance quickly allows your business to take advantage of opportunities or avert business problems.
Bridging is frequently used for; Stock purchase, equipment and assets, business acquisition, tax or VAT bills and helping out with general cash-flow problems.
Undervalue purchase – 100% funding.
Working with lenders who understand the property market will pay dividends for the smart investor.
Having access to property opportunities below the market value of that property is a great way to increase your profits. Our specialist panel of bridging lenders will lend against the value of the property rather than purchase price allowing funding of up to 100% of the purchase price.
Can I get a 100% bridging loan?
Purchasing Below Market Value
Below Market Value (BMV) transactions can be funded based on the value of the property rather than the purchase price.
There must be a valid difference between the value and the purchase price – the valuer will need to confirm this.
Please discuss with your advisor to check you would be eligible.
Using the equity in other property
Many lenders will take into account equity in the rest of your portfolio or your residential property.
Lenders will only lend within their standard lending criteria and they will take existing lending off what is available so check your balances and discuss with your Acorn advisor to get the best possible deal.
100% funding for property development
For developments and some refurbishment cases, it’s possible to arrange 100% borrowing against the costs of the project.
For more information about development or refurbishment finance, we have a dedicated development finance page.
Bridging loan rates and costs
How much will a bridging loan cost?
With rates starting from as low as 0.44% per month there’s never been a better time to utilise a bridging loan to boost your property enterprise or business.
The range of interest and other costs can vary enormously though, the market is wide and lenders each have their own specialisms. Lenders have differing policies on adverse credit, property types and your planned repayment route.
Cut through the chatter and find the best interest rate for your circumstances by discussing your needs with an Acorn consultant.
What is bridging finance?
Pubs, hotels & restaurants without the requisite accounts
Sometimes you find the perfect business but the current owners just are not trading it to give us the proof we need that you can repay a commercial mortgage.
That can be for a number of reasons;
- The unit is closed
- The unit is being run by tenants or relief management, meaning that the vendor does not have access to the accounts (this is the case when a pub company is selling)
- The unit has under-traded, due to the retirement of the owners or ill health
- It’s a brand new site being developed
Whatever the reason, as long as you can produce a comprehensive business plan (we can help with this) then the funding can be arranged to make the purchase.
Over the years we’ve known customers double the value of outlets by buying at the very bottom of the market and being able to trade them successfully.
The failure of the previous owner does not need to make a pub, hotel or restaurant site unviable, it may mean that they had the wrong business model or were the wrong operators.
If you are the right operator with the right plan – funding will be available.