Mortgages
Bridging Finance
When might bridging finance be the best option?
Bridging loans are mainly used by clients that need quick, short-term capital secured against either property or land. Typical scenarios include:
-
A broken property chain. A bridging loan enables a seller of one property to secure their new property before the sale of their existing property goes through.
-
Buying at auction. Bridging finance is popular with those buying property at an auction where completion often has to take place within 28 days and where traditional financing can often not be organised quickly enough.
-
Buying an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). Bridging finance is ideal to get the work completed and make the property habitable, before refinancing onto more a more standard mortgage.
-
Purchase of land. Short-term lending is an effective method of securing a
-
Requiring planning permission. Bridging loans can be used in the interim period whilst obtaining planning permission before securing development funding.
-
Needing a lease extension. When a property has a short lease a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.
-
Renovating or developing a property. A property investor may want to renovate a property within a few months and either sell it on or refinance. A bridging loan can often be the perfect vehicle for this short-term capital requirement.
-
Needing flexible lending criteria. Bridging lenders are typically less concerned with income, affordability, age and credit history. Their priority is the value of the property being offered as security and also the exit route.
-
Short term business finance. Where a business has short term cash flow issues a bridging loan can provide a simple and effective solution in a far more timely manner than many traditional commercial finance loans.
With bridging finance being a short-term solution, every borrower must have a creditable exit strategy to repay the loan. This is often to sell the property or refinance onto more traditional property loans.
Bridging finance is designed to be short-term funding and is usually arranged for up to 12 months. However, some lenders will consider applications that go beyond this, with 18 - 24 months possible, depending upon individual circumstances.
Bridging finance is typically available up to 75% of the Open Market Value of a property but we will often arrange funding up to the full value if additional security can be provided.
For property development the maximum Loan-To-Value can be based on the full Gross-Developed-Value (GDV) meaning funds can be secured to carry out the works.
Development finance is essentially a form or short-term lending or type of bridging loan used to develop a property. Often arranged over a longer period than a traditional bridging the finance is usually draw down in stages throughout the project to limit the interest charges.
Every development has different financing needs and our advisers can assist with both regulated and non-regulated development loans for projects from one dwelling to entire renovations or ground up developments of apartment blocks comprising hundreds of units.
