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Bridging Finance

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What is bridging finance?

Bridging finance is a form of short-term lending, secured against land or property to aid cash flow. It essentially bridges the gap until a more permanent financial solution can be arranged. Bridging loans are usually offered for between 1-24 months, with the loan repayable in full at the end of the term. It’s also worth remembering they are easy to set up, and perfect for those looking to build up a property portfolio. It’s currently the markets busiest product playing a huge role in personal and development projects.

Refurbishment or redevelopment of a property is perhaps the most common use of this type of finance. It can allow the project to carry a bigger valuation on completion, outweighing the cost of the loan including interest. Refinancing this asset carrying its new value, sometimes on a smaller rate of interest, may result in a short term profit thanks to the Refinancing process.

How much can I borrow?

The lender will look at the loan to value of the property and usually lend up to a maximum of 70% to 75% LTV on a first charge, and usually a maximum of 65% LTV on a second charge.   

Common Bridging Scenarios

In many cases this type of product will be utilised by individuals wishing to purchase a property, but still awaiting the completion of the sale of their current property. They’ll complete the new purchase on a bridge to secure it, only redeeming the loan once the sale of their property completes. 

Another example can involve purchasing at auction. Typically you’ll need to complete within 28 days, which usually isn’t enough time to obtain a residential or BTL mortgage, and still be able to complete on the property deadline. Other common scenarios include: 

  • Purchasing below market value
  • Preventing repossession
  • Funding property works to increase the properties value 

What are my options of payment?

There are three payment methods for servicing bridging:

  1. Monthly Payments - The lender will calculate the interest payable and this will have to be serviced by monthly payments as a normal mortgage. 
  2. Interest Rolled Up - The interest will be compounded each month until the balance of the loan is redeemed in full. 
  3. Retained Interest - The lender will calculate what the interest will be over the term of the loan and deduct this from the loan amount upfront.

Is this type of finance regulated?

When such a loan is secured against the property or one you may have lived in, it’s fully regulated for your protection. However, bridging loans against buy-to-let’s, property development sites or commercial property are not. It’s important to note it’s a fairly complex area of expertise, and you need quality professional guidance. As an FCA regulated broker our experts can offer you the very best advice, so you don’t need to worry.

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Details submitted through this form are confidential. We will process any personal information collected in this form in accordance with our Privacy notice. The information therein is used only to contact you to discuss the areas you've expressed an interest in. Please note the contents of this form is sent via email and therefore may not be secure.