Bridging Finance

Bridging Finance is a general term that refers to short term finance where you can borrow for a shorter period (usually 12 months) to purchase, refurbish or release equity from a property.

Bridging Finance offers our investors and developers the flexibility to react to opportunities as they arise.  Whether you are looking to purchase a property for refurbishment, need time to sell after completing a development or have agreed to purchase a property at an auction; we can help find the right funding for you.

Auction Finance

If you are buying a property at auction, you will have 28 days to pay the remaining balance and complete your purchase.  Short-term finance is often used as, by its nature, it ‘bridges’ the gap between purchase and securing longer term finance.  It can be used to purchase residential, semi-commercial and commercial property and also land.

Have you considered?…..

  • Ensuring that your funding is in place before the auction
  • How the loan will be repaid – sale or remortgage
  • If you are keeping the property, do you have a lender agreed in principle
  • Is the term of the loan sufficient
  • Your credit record
  • If the property requires work, do you have the experience
  • Have you read the legal pack

Refurbishment

Are you looking to purchase a property, add value through a refurbishment and then sell or retain for rental?  Is the property not currently mortgageable or requires planning permission to convert to an alternate use?

Lenders in the short-term finance market have created products which work with and for you in completing your projects and/or building your portfolio.

Have you considered?…..

  • Planning requirements for your refurbishment
  • Whether the work is light or heavy refurbishment
  • Overall costs, rather than interest rates alone
  • Your experience in completing refurbishments
  • How the loan will be repaid – sale or re-mortgage
  • If keeping the property, is the rent achievable sufficient to service the mortgage

Development Exit

Development Exit finance, also known as a ‘marketing bridge’ is often used by clients who are approaching the completion of a project and need time to sell. It’s not always possible or can be costly to extend your development finance and a short-term-loan, at a lower cost, may be the solution.

Have you considered?…..

  • Overall costs, rather than interest rates alone
  • How the loan will be repaid if the property doesn’t sell
  • Is the property complete

How Bridging Loans work

Bridging lenders are different to longer term mortgage lenders in that they will usually hold interest rather than expect you to service the loan on a monthly basis and this is deducted at the start of the loan.

Interest is charged on a monthly basis with rates ranging from 0.60% to 1.5% pcm.

Example – let’s assume you are purchasing a property at auction for £100,000, will spend £10,000 on a quick refurbishment which takes 3 months and then you are going to sell for £150,000 so we are asking for a 6 month loan.

Loan – 75% of purchase price                                              £75,000

Less

Lenders arrangement fee (typically 2%)         £1,500

6 months retained interest (at say 0.8            £3,600

Lenders legal costs                                               £750

£5,850

Net Loan received                                                                 £69,150

In the example above, you would need to show £31,000 to meet the purchase (not £25,000) plus the refurbishment costs in full to satisfy the lender.