Bridging Finance
Bridging Finance is short-term finance secured against a property and is widely used by property investors and developers for a variety of reasons:
Bridging lenders will lend in situations where the more traditional lenders will not.
Funds are provided in a much shorter timeframe if a quick completion is required.
Acceptable security includes residential and commercial property of any type and in any condition, and land with or without planning consent.
A bridging loan can be used to purchase property that may be deemed not mortgageable by standard lenders.
Short-term facilities can be used for 1 - 24 months.
Interest can be deducted or serviced or part serviced part deducted as required by the investor to assist with cash flow.
As the cost of a bridging loan is higher than a more traditional loan, an exit strategy is important. Exits are usually via refinance or a sale on the open market – a good strong exit will allow you to achieve the maximum Loan-to-Value (LTV) bridging loan.
There is a vast array of bridging products on the market and it is essential a holistic approach is utilised to find the most cost-effective option to meet your requirements.
What is Bridging Finance used for?
The uses of Bridging Finance are wide-ranging. Some examples are:
Fast purchase of a property - This could be from an Auction, for example. When a sale is agreed at an auction the purchaser usually has 28 days or less to complete. Bridging Finance is perfect for this.
The purchase of an uninhabitable or “un-mortgageable” property - A property is not deemed to be mortgage-able if it is not habitable. Perhaps the property has suffered from fire or flood damage, or it has no working kitchen or bathroom.
Refurbishment - restoration or conversion or a property. A bridging loan is ideal for buying a property that needs works carrying out on it. Funds can often be provided to facilitate the works on the property, as well as the purchase.
Re-bridging - where a borrower needs another bridging loan, but the existing bridging lender will not extend the loan.
What are the Key Features of Bridging Finance?
Loan-to-Values (LTVs) of up to 80%, and up to 100% with additional security.
Interest rates from 0.4% per month, dependent on the LTV required.
Loans sizes from £25,000 upwards, with no maximum!
No redemption fees or exit fees in many cases.
Available throughout the United Kingdom, and some European countries.
Bad or Adverse credit Bridging Loans available.
Loans from 1 month to 3 years.
No upper age limit for borrowers.
What information do you need to progress a Bridging Finance loan?
Who will be borrowing the money? (A limited company or individual?)
Full name, last 3 years address history and Date of Birth for each borrower.
Full Address of the property to be purchased including postcode.
Sales Particulars or valuation if you have one.
Planning permission details, if applicable.
Explanation of your plans/intentions for the property.
How will the Bridging Finance loan be repaid? (usually via a sale or refinance).
How long does it take to arrange?
A Bridging Loan can actually be completed in 48 hours. Here at Bridgewater Property Finance we always endeavour to provide you with an Agreement-in-Principle (AIP) within 24 hours. Funds can be made available very quickly, providing all the professionals carry out their respective roles in a timely manner.
How much does Bridging cost?
Bridging Finance has got cheaper recently with rates from around 0.49% per month. The interest rate depends on the required Loan To Value, credit history and experience of the borrower.
What fees are involved?
Arrangement Fees – A fee charged by the lender for providing the loan.
Exit Fee – this may be charged when the loan is repaid.
Surveyors or Valuer Fees – an RICS valuation is usually required.
Legal Fees – Solicitors fees for dealing with the loan.
Interest – usually calculated on a monthly basis.