Solving your property problems
When you need to complete quickly, or your property doesn’t fit mortgage criteria then a bridge loan might be the answer.
Bridging finance is faster – with the potential to complete within a week. It’s also more flexible, letting you refurbish the property before you remortgage or sell.
Bridging finance – what is it and what’s it for?
A bridging loan (bridge loan) is a short term funding solution to “bridge” a gap between two points.
There is a wide variety of uses for a bridging loan, only a few of which we list here. So if you have
So discuss your plans with our bridging finance experts, we’ll then be able to arrange the ideal loan for your project.
What can a bridge loan be used for?
- Buying at auction. Typically completion needs to be within 28 days.
- Being a “cash buyer” to agree a better price in a pressure situation
- Buying a property for refurbishment – properties without kitchens or bathrooms – so unsuitable for a term mortgages.
- Pulling funds from a property in the portfolio to fulfil a short term need in your property or other business.
- Flipping the property – buying and selling it in short succession.
Frequently asked questions around bridging loans
Normally bridging covers up to 70% – 80% of the security value. But by using additional security from your portfolio it’s possible to raise up to 100% of your requirement.
Most bridging loans are quoted as a “Gross Loan to Value (LTV)” and so the fees and interest would be deducted from the loan.
Agreeing to service the loan interest will get you a higher net loan but you’ll have to prove you can afford the payments.
As with other lending the interest rate will depend on the risk perceived by the lender – so rates will depend on;
– the loan to value of the bridge loan
– how long you need the funds for
– the amount you’re borrowing (most lenders have minimum and maximum loan amounts)
– where the property is (some lenders don’t like certain parts of the country)
– how you plan to repay the bridging finance (the more certain the repayment method the better loans are available)
Monthly interest rates vary from sub 0.5% (currently 0.44% as at October 2021) and go up to 2% or more – although these are extremes and extremely rare!
Most of our real-life customers are bridging at rates between 0.65% per month and 1.25% per month.
Bridging finance lenders look first at the security and the “exit” (how they are being repaid). For some lenders in some situations the security will be all they look at. So (almost) regardless of credit history, income, etc. as long as your plan stacks up then there’s a lender who will provide a bridge loan.
If your exit is to remortgage the property (onto a buy to let or commercial investment mortgage, commercial mortgage or residential mortgage) then we’ll need to demonstrate to the lender that the exit is likely to be approved, so that might involve credit scoring, income/expenditure etc and in many cases we’ll arrange a decision in principle at this stage to evidence the plan.
The short answer is “as long as you need it”. Generally bridging loans are under 24 months as that should cover most projects, some standard bridging lenders will extend to 36 months for bigger projects. If the project is planned to take more than 36 months then there are lenders who would take a more bespoke take on the lending but we’d have to ensure that this was the most effective way of lending, if interest is being deducted from the loan it makes a large dent in the lending for longer bridging loans.
There’s no minimum term for bridging loans, sometimes they are repaid on the same day they draw down in order to facilitate a “back to back” purchase and sale of the security property.
Again – how much you can borrow on a bridging loan is a “how long is a piece of string” question.
Our lending panel starts as low as £5,000 (although with legal fees, arrangement fees etc. it’s not an ideal way to raise money). There is absolutely no maximum loan, lenders have their own minimum and maximum terms but each is different and we could arrange funding into the billions if necessary. Our current largest loans are in 8 figures.