Bridging loans are a form of short term mortgage, typically arranged over 3-24 months only.
One of their biggest advantages is that they can be arranged fast, loans are approved much more quickly than a conventional mortgage lender, often in a matter of days.
Every year our experienced brokers help individuals and businesses to raise money quickly to take advantage of short term opportunities, to provide much needed cash flow or bring stability to property chains.
What is a Bridging Loan?
Bridging finance is simply a short term mortgage, secured on a property. Loans are available as a first charge (the only mortgage) and also as a second charge.
Typically the loan term will be less than 2 years as the money is only needed for a short period of time.
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.
The lender will look very carefully at the property used to support the loan and the method you will use to repay them (this is the exit strategy). Proof of income is rarely asked for and loans are approved even with a few blemishes on your credit profile.
What can a Bridging Loan be used for?
The money raised from a bridging loan can be used for any (legal) purpose. The lenders aren’t too concerned about the reason just as long as your security and exit route stack up.
Here are some common uses for a bridging loan:
Chainbreaker
If your property chain gets a bit stuck then a bridge will allow you to carry on with your new purchase (and complete) while your current home sale goes through.
Auction purchase
Seasoned property investors will know the advantages that a bridging loan can provide for an auction purchase. Primarily it can be arranged fast and funding is available for unmortgageable properties.
Lease problems
Bridging can either help to purchase a property that has a short lease or to raise the necessary funds to extend the lease on something you already own.
Grab a bargain
Very simple. If you’ve seen a bargain BMV property that needs you to move fast then a bridge is the answer. Arranged quickly and funds can be released in a matter of days.
Buy to sell
Bridging is perfect for buying a property which you will then sell on. The property may or may not need any refurb work. The loan will be arranged quickly and then repaid once the property sale goes through.
Buy to let
The majority of buy to let properties are purchased with a buy to let mortgage. But, some investors like to use a bridge because it is fast and uncomplicated. Once bought, the property can be refinanced in your own time.
Probate delays
When someone dies you need to wait for probate to be approved before you can begin distributing the estate. A probate bridging loan can be used by an executor to fund the IHT bill, or a beneficiary can use one to gain early access to part of their inheritance.
What is the maximum LTV?
The maximum loan to value for most short term bridging lenders is 75%.
It is possible to increase this to 100% by bringing additional security in to the deal. This could be a commercial property, buy to let or your own home.
Who can apply?
Individuals, partnerships, sole traders, Special Purpose Vehicles (SPV), limited companies, executors and trusts.
No age limit.
How fast can bridging loans be arranged?
Occasionally you will see claims that a bridging finance application can be completed in just 24 hours. Although this is certainly possible, for most borrowers a more realistic timescale would be 7-14 days.
(btw This is still fast!)
Bridging lenders are geared up to be nimble and move quickly, this is one of the main advantages of fast bridging finance.
But the complexity of a bridging application along with gaining access to the security property and all of the legal work can mean that the process takes longer. It will always be much faster than a traditional mortgage company and with bridging there is no requirement to prove your income or have a sqeaky clean credit file.
Bridging loans will be classed as either FCA regulated or unregulated depending on how they are to be used. A regulated bridging loan will take longer to arrange than an unregulated loan as there are more conditions for the lender and you to comply with.
How do you repay a bridging loan?
Unlike a standard mortgage, bridging lenders don’t normally ask you to make any monthly repayments.
The loan will be set up as interest only and for a fixed number of months, 3-24 months. The loan interest is calculated monthly and then added to the original loan. This happens each month.
The lender will expect their money by the end of the agreed term.
You repay a bridging loan by paying off all of the money owed in one go, capital, accrued interest and any accrued fees. This will normally be via sale of the property or by refinancing.
We are experts in arranging low-cost fast bridging loans
WE CAN OFFER
- Loans from £50,000
- Lending decision within 24 hours
- Interest only
- Interest roll up
- Competitive rates
- Regulated and unregulated loans
- Terms from 3 months
How to apply for a quick bridging loan
Bridging loans are known to be quick as the lenders work fast but they also don’t need lots of information about you which can slow down the process.
To give yourself the best chance please call us on 020 8301 7930 before you apply for any bridging loans.
Our experienced brokers will learn about you and your need for short term finance before offering a way forward. They will then make sure your application is as complete as possible before passing to the lender for them to look at. This initial prep-work helps to avoid delays and smoothes the loan underwriting process.