Bridging finance was in the past seen as the option to choose when there was no other way forward.
However, the property industry has changed dramatically in the past 5 years and as a result Bridging is now part of the main stream finance facilities with new lenders entering the market. This means that the competition between them has resulted in the decrease of interest rate and enhanced their appetite when it comes to lending.
Main uses of Bridging Finance:
- Chain Breaking on residential purchases when it is taking to long to sell a property or one of the parties is taking to long to get a mortgage,
- Light Refurbishment e.g. new kitchen or bathroom
- Heavy Refurbishment e.g. Extension, conversions, change of use.
- Auction purchases
- Purchase of non-mortgagable properties
- Rates start from 0.59% per month
- Loan to values for up to 75% on single properties
- terms from 1 day until 18 months (12 months for regulated transactions)
- exit fees from 0%
- Available for both regulated and unregulated transactions
When considering Bridging finance it is important to establish the amount of finance required, the type of security offered and the exit route, these three points will be the most important factors that will determine the availability of the facility.
Often, borrowers will have the option to have the interest added to the loan, unlike with a BTL mortgage, this means that borrowers will not need to make payments on a monthly basis, however, it is important to mention that opting to take this option means that the available net loan amount may be reduced.
As mentioned above, the exit route is a crucial part of the whole process, lenders want to be repaid and will need to be comfortable with the exit strategy in place. The two main exit options in the bringing industry are, sale of property, which normally takes place when a borrower purchases a property, carries out either light or heavy refurbishment and sells the property at an enhanced value or retains the property and refinances it on to buy to let or residential mortgage depending on the circumstances.
The fastest growing use of bridging finance and short term loans is heavy and light refurbishment loans.
These are used to purchase a property that is uninhabitable and therefore un-mortgageable. A short term loan is arranged to purchase the property at up to 70% loan to value and if required a loan to cover some or all of the refurbishment costs. The type of work required can range from putting in a new kitchen and bathroom to work requiring planning consent, structural work and change of use from commercial to residential and vice versa. Landlords and investors often use this type of finance.
All of our partner firms are members of the NACFB (National Association of Commercial Finance Brokers), they carry Professional Indemnity Insurance and subscribe to the NACFB Code of Practice which is registered with the Office of Fair trading.