Bridging loans are one of the most useful, multi-purpose, types of lending solutions available. You can get a bridging loan approved on almost any property for almost any reason.
And we can arrange them really fast.
What is a bridging loan?
A bridging loan or bridging finance is a short term secured loan or mortgage. The property used as security can be either residential, buy to let or commercial. These types of loans are temporary, allowing you some time to refinance or sell a property.
The bridging loan term can be for just a few days or months, upto 1-3 years maximum. At the end of the term the lender will require full settlement of the debt via an exit strategy.
Most lenders are happy to lend upto 75% loan to value but it is also possible for a 100% bridging loan to be granted in certain circumstances.
Loans are available to both Limited Companies, Special Purpose Vehicles and Individuals including landlords and property developers.
SPEED
DURATION
OPPORTUNITY
A bridging loan is a great solution when you need quick access to capital
IT IS A SHORT-TERM INTEREST-ONLY LOAN TO ‘BRIDGE’ THE GAP
THE COST OF A BRIDGING LOAN
The interest rate charged for a bridging loan is a monthly amount that varies with the type of project it is to be used for.
The lenders will also require an arrangement fee, this is an upfront fee but most lenders will allow it to be added to the loan. There’s also the normal survey fees and legal fees to pay.
BRIDGING LOAN ELIGIBILITY
Finance is available to both companies and individuals. Bridging lenders will look at all aspects of the deal when assessing eligibility.
This will include undertaking credit checks, looking at the property itself, your planned works or improvements and your ability to cashflow or pay for the project until exit.
DURATION
Bridging loans are designed to be repaid quickly, typically within a timeframe of a few weeks or up to 12 months.
However, some lenders may offer longer terms, stretching up to 24 months in some cases.
NO REPAYMENTS
There are no monthly payments needed for bridging finance.
The interest is ‘rolled up’ and will need to be repaid at the end along with the capital sum.
Bridging loan topics
Here are some additional articles and guides that explain how these short term loans work and what they can be used for.
Guide to property auction finance
Auction finance is a type of bridging loan which allows you to buy residential and commercial properties at a property auction. It can be arranged quickly, for almost any type of property, and suits the tight timeframes that apply to auction property transactions.
Regulated bridging loans
What are the differences between regulated bridging loans and unregulated bridging loans and when would you need to use one?
Secured loans and mortgages in the UK are classified by the Financial Conduct Authority (FCA) as either regulated or non-regulated.
Short Lease Mortgages
Property leases are issued for a specific number of years. Once the remaining term gets low fewer lenders will be available to offer mortgages. Here we explain how bridging loans can help with a short term lease.
An introduction to bridging loans
Our easy to read introduction to bridging loans covers how they work, what they can be used for and how they differ from a standard mortgage.
How does bridging finance work?
When applying for bridging finance the choices and decisions related to the loan are far less than for a long term mortgage that could be used for your own home or a buy to let. The main reason for this is that bridging finance is for the short term only.
Exit Strategies
Bridging loans are short term by design and so you need a way of paying them back, all in one go. Having a solid and realistic exit strategy will help to get the lenders on your side.
Bridge to let mortgages
A bridge to let mortgage combines a short term bridging loan (for the purchase), with a buy to let mortgage (for the exit) in one convenient package. This solution creates a smooth transition from the specialist bridging finance over to the pre-approved buy-to-let mortgage.
Buy to sell mortgages
If you are looking to buy a property to refurbish and sell when finished, then a buy to sell mortgage could provide the finance you need. It is a short term mortgage that is suitable for property investors and developers who want to ‘fix and flip’.
Open bridging loans
Open bridging finance is offered without knowing the exact date of repayment. Due to this uncertainty the lender will charge a slightly higher interest rate than for a closed loan.
Closed bridging loans
When you know how you are going to pay back your bridging loan, and more importantly when, then a closed bridging loan is a cheaper option.
Why use a bridging loan?
Bridging Finance can be used in so many different ways, to achieve so many different objectives
Here are some examples of what is possible:
As a property chain breaker when moving house (requires a regulated bridging loan). Access some of the equity in the house you are selling enabling you to ‘move’ this money earlier in the process to complete the purchase of the new property.
Purchase of an uninhabitable property for a light or heavy refurbishment, which is not suitable for a standard buy to let or commercial mortgage at outset
Develop a derelict Barn, with full residential planning permission to convert into a house, to be sold, or retained as a buy to let investment property
Purchase of an investment property that is inhabitable, but could not be considered suitable for letting, because works are needed
Property purchase at a genuine discounted price (BMV) with the loan based on market value, not purchase price. This could include properties with a short lease.
Purchase of any property where speed and convenience is the objective. Once owned you can then apply for permanent longer term finance without deadlines (a popular option for investors who want to move fast)
Talk to the experts
Drake Mortgages is a bridging finance broker and we can source competitive rates from across the market. We have built relationships with specialist lenders who do not have a presence on the high street to secure finance where others cannot.
We can help arrange a bridging loan, a short-term loan that provides fast access to funding, or development finance for the specific purpose of building new properties or making substantial changes to existing properties.
