Unlocking the Power of Bridging Finance. All You Need to Know
It’s quick short term finance for a purchase or remortgage.
Fast competitive bridging finance from reputable and financially secure bridging lenders. We have reliable and competitive lenders for you. Our strong relationships with lenders ensure we can obtain fast and flexible loans for your needs.
We can arrange bridging finance for your next project. It might be a flip, a refurbishment or you need to release equity from a property for short-term cash flow.
If you are in a chain we also have lenders who can help finance the purchase whilst retaining your current property. We offer second charge bridging as well.
If you need finance for buying at auction we have that covered and for more information on auction finance read here
An experienced developer had purchased an empty office block for £450,000 in Gloucestershire which had planning permission to convert into six flats. The work was going to take eight months which included an extension.
Because of the refurbishment and the property had no current income the client could not get a BTL mortgage.
We applied for a bridging loan over a 12 month term. A Bridging lender will provide finance on a property that is not producing income and requires a refurbishment. The type of work for this property was classed as heavy refurbishment, our client had a 25% deposit and funds to pay for the work. They could also pay the monthly interest from their existing property portfolio. We found a lender who accepted this arrangement, as not all do which reduced the amount of the Day 1 deposit from our client as usually you have to to provide funds to cover all the interest upfront.
The finance was agreed to provide enough time to finish the refurbishment and complete the remortgage. We had already identified that several lenders would provide the exit route on a BTL Mortgage which gave our client and the lender the comfort the repayment for the bridge was in place.
After spending £220,000 on the refurbishment they now have six new units in the portfolio worth £875,000 producing a healthy yield.
If you need more information on Bridging Finance contact us on 01565 654005
Bridging Finance Questions
Bridging Finance is based on the current value whilst Development Finance is based on the projected value once the works have been completed.
It helps but not always a requirement, we have lenders for those starting out to full time investors, developers and landlords. Having experience of a similar size and cost will give you a greater lender choice on larger projects.
Bridging finance can be used for residential property, land ,commercial property including offices, retail and industrial units.
Yes you can. Typically a light refurbishment is improving a property and there is no structural work. It usually includes a replacement kitchen, bathroom, decoration, flooring, resolving damp issues, rewiring, heating, replacement doors and windows.
Yes you can. Typically heavy refurbishment covers structural or work that requires planning permission e.g. extensions and loft conversions. It can include commercial to residential conversions or a conversion into an HMO.
Experience is preferred of one similar project of size and cost over the last five years but if it’s your first time, there are still lenders for you.
There is no one answer for everybody. It depends on your personal situation, the property and your plans for it. A minimum value of £75,000-£100,000 is required by many lenders and you can get up to 75% of the value of the property.
For certain types of refurbishments you can apply up to 85%.
If you can provide additional property as security 100% is also possible.
A minority of lenders will do six months, most 12 months and for larger projects we can obtain finance up to 2 years or longer.
Typically there is a lender set-up fee of 2% and interest is charged per month based on the loan to value (LTV).
Rates vary based on the amount you require, it’s LTV, the property, your experience and credit file. Please contact us if you have a particular project in mind.
In addition there is a valuation fee, your solicitors and most of the time the lender’s solicitor. Occasionally there is an exit fee based on a number of months interest, although this is rare.
If you are carrying out a refurbishment the lender may carry out a mid term inspection and you are responsible for the fee.
It can be a lot. Daily interest is preferable when the lender calculates interest surprisingly on a daily basis. For monthly interest if the loan was taken out on 1st August ,the first month’s interest finishes on 31 August.
If the loan is repaid on 1st September you would pay an extra month’s interest even though it is only for one extra day.
Most lenders retain interest, and a minority roll it up and if you have plenty of surplus cash per month you might get serviced.
Retained and rolled up interest is deducted from the amount you wish to borrow.
You have to find sufficient funds to cover the interest for the period of the loan as well as the deposit.
Retained is the most common and for the majority of the lenders this is the only option you have.
Serviced is like a traditional mortgage when you are allowed to pay the monthly interest from your income.
Hopefully No but it’s dependent on the lender and how aware your broker is of the market. All lenders have a minimum term which is usually one or three months, although we have seen a minority at six. No matter how early you repay the loan you will always pay the minimum term.
However some lenders, although we don’t deal with these, will take interest for the duration of the loan even if it is repaid early. Not very nice.
For example you take out a nine-month loan and repay after three, the lender will still take nine months interest.
The two most common methods are sale of the property or a remortgage. Before you go into bridging finance always ensure you have a Plan A, Plan B and preferably a Plan C.
If it is a remortgage you need to protect your credit file as if it was a loved relative as a deterioration may affect the number of lenders who will repay the bridge.
All brokers and lenders do not share our morals and quite often you will see a very attractive interest rate to hook you in and then further on in the process the rate increases and it’s too late to go anywhere else.
There are also lenders who offer lower rates for the first 3-6 months of the loan but increase them considerably after that.
It can be quite difficult to buy a property, do a refurbishment and remortgage within this period. Often a longer term with a higher rate at the beginning is better value for you.
Watch out for the method of valuation. It should ideally be Open Market Value (OMV) which does not impose a time restriction on the sale. Some lenders work off 180 day or even 90 day which usually is much lower than the OMV.
Finally what’s the reputation of the broker and the lender like? Some of the smaller lenders may not have the money to complete on the loan.
If your broker is not FCA regulated they won’t have direct access to all of the more established lower-priced lenders.
You can check the regulation by looking at the bottom of their emails or website and either they or the firm should be on the FCA Register.
You may have the quickest broker and the best lender in the market but if you don’t have a good solicitor the process may be extremely stressful and can even result in missing the auction deadline.
It’s essential your solicitor has experience of bridging finance and dealing with a lender’s solicitor as not many do.
We have a list of solicitors that understand the bridging market and some lenders will also allow their solicitor to act for you.
If you need more information on Bridging Finance contact us on 01565 654005 or by email.