Bridging Loans for Property Funding

Picture this: You’re on the cusp of a dream property deal, but a financial roadblock stands in your way. That’s where bridging loans swoop in as the unsung heroes of short-term financing. Think of bridging loans as the lifebuoys of property finance, secured against your valuable real estate. With monthly interest charges keeping things spicy until the loan is all wrapped up, these loans are your golden ticket to that coveted deal.

Now, here’s the juicy bit: the interest rates are all about your property, the loan-to-value ratio (LTV), and your personal situation. And, here’s a secret for you – the most dazzling deals often shine on loans against residential properties with an LTV of 50% or less.

So, if you’re ready to dive headfirst into the world of bridging loans, then get in touch today

Think of a bridging loan as your trusty financial sidekick, always ready to swoop in and save the day. These short-term champs typically strut their stuff for anywhere from 1 to 18 months. But here’s the kicker: they’re your go-to pals when you need a quick cash infusion, and you can’t wait around for other funds to arrive.

Imagine this scenario: You’re on a house-hunting expedition. You’ve found your dream property, but you’ve still got your current place to sell. Enter the bridging loan! It’s the ultimate solution for bridging the gap between buying one property and waiting for the other to fly off the market.

Now, let’s take a trip down memory lane. Bridging loans first made their grand entrance in the 1960s when the big banks and building societies decided to join the party. They were like the rockstars of property purchases, funding new digs even before you’d said goodbye to the old ones.

And today, they’ve become the darlings of the finance world, with cool specialist lenders like Together Money, United Trust Bank, and Shawbrook Bank leading the charge. The bridging loan stage has seen its fair share of drama, growing into a £4.8 billion extravaganza by 2022, and it’s still on the rise.

While that’s an impressive number, the bridging market, as massive as it is, is still like the hidden gem at the treasure hunt compared to the colossal mortgage market, which is a jaw-dropping £1,613 billion.

Cracking the Code of Bridging Loans

Ever wondered how those nimble, quick-fix financial solutions called bridging loans actually operate? We’re here to unravel the mysteries.

A bridging loan is your ticket to swift cash when you’re gearing up for a property purchase or refinance. It’s like a cash injection, handed to you in one big lump sum.

Now, here’s the magic trick: with most bridging loans, the interest charges get cleverly “rolled up” into the loan itself. In simple terms, this means you won’t be burdened with monthly interest payments. This nifty feature is also known as “retained interest.”

As you waltz through the loan term, you’ll have the chance to repay the bridging loan in full. That includes all the interest and any outstanding charges. And, to top it off, the legal charge gets gracefully removed from your property.

But how exactly do you settle this loan? You’ve got a couple of options in your back pocket. The most common exit strategy involves the sale of your property. Alternatively, you can swing for a remortgage.

Two heavyweight contenders in the world of bridging loans are the Loan to Value (LTV) and equity. Lenders keep a keen eye on these when considering new loans. For regulated bridges, most lenders are comfortable offering up to 75% of the property’s value. However, for the unregulated ones – those not overseen by the Financial Conduct Authority (FCA) – some may stretch their limits to 80% LTV. Keep in mind that the LTV might be a bit lower if you’re dealing with a second charge loan. So, there you have it – the secret code to bridging loans unveiled!

Do Bridging Loans Serve as Mortgage Subsitutes?

Indeed, bridging loans can effectively replace traditional mortgages. They step in as a short-term, alternative financing solution in scenarios where a standard mortgage might not be an option. Bridging loans come into play when you require a swift cash injection against a property.

There are several situations where bridging loans take the lead:

  1. When the property isn’t eligible for a mortgage.
  2. When you need to expedite the purchase of a new property.
  3. When you encounter a short-term financial gap that demands immediate attention, such as securing a bridging loan to acquire a new home before your existing one finds a buyer.

Property investment takes the lead as the predominant motivation for opting for a bridging loan. This rings true whether you’re funding an investment property, a buy-to-let venture, or even your very own abode.

The key allure of bridging loans in the realm of property investment lies in their ability to swiftly secure properties and implement value-enhancing property refurbishments when necessary.

More Information on Bridging Loans

The beauty of bridging finance is its inclusivity. Virtually anyone can access these loans, provided they own a property with sufficient equity.

Our lending options extend to a broad spectrum of borrowers, encompassing:

  • Individuals
  • Partnerships
  • Limited Liability Partnerships (LLPs)
  • Limited Companies
  • Special Purpose Vehicles (SPVs)
  • Trusts
  • Overseas borrowers

If you have a property to your name and the equity to back it up, the world of bridging finance is at your service.

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Key Features of Bridging Loans

Delve into the heart of bridging loans, where key features come to life:

  • Max LTV: Your Loan-to-Value potential stretches up to an impressive 85%.
  • Interest Rate: The intrigue starts at just 0.47% per month, setting the stage for competitive financing.
  • Charge Types: Whether it’s a 1st, 2nd, or 3rd charge, all are carefully considered.
  • Term: Choose a timeline that suits your needs, with terms spanning from 1 to 36 months. For regulated bridge loans, the maximum term is capped at 12 months.
  • Interest Type: Tailor your repayment approach. Interest can be added to the loan, deducted, or serviced as you see fit.
  • Completion Timescale: The clock is ticking, but you’re in control. Expect your bridging loan to wrap up anywhere from 5 days to 3 weeks.

And that’s not all! Here’s what you need to know about the eligibility criteria:

  • Property Variety: Whether it’s residential, commercial property, or even vacant land, they all fit the bill.
  • Eligible Entities: Bridging loans extend their welcome to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals, and pension funds.
  • Age No Barrier: There’s no maximum age limit, just a minimum of 18 years.
  • Geographic Reach: The good news? Bridging loans are at your service in England, Scotland, Wales, and Northern Ireland.
  • Adverse Credit Friendly: Don’t fret if your credit history isn’t spotless; adverse credit is considered on a case-by-case basis.

The Perks

Speed is the name of the game. Bridging loans can be arranged at a lightning-fast pace, with some lenders completing the process within 5 days to 2 weeks. In some instances, you can even have the loan in hand on the same day you apply, a feat unrivalled by most alternative financing options.

The bridge loan market is currently engaged in a price battle, resulting in significant cost reductions. Interest rates have become more competitive, with realistic starting rates at 0.47%, and even lower, at 0.43%, for specific applications. Historically considered a drawback, the cost factor is now evolving into an advantage.

Bridging loans offer a level of flexibility that surpasses traditional mortgages and secured property loans. They adapt to your unique needs and circumstances.

Say goodbye to those monthly financial burdens. With bridging loans, you have the option to roll up or deduct interest, eliminating the need for regular monthly payments. This feature can be a lifesaver for maintaining healthy cash flow during property refurbishments or sales processes.

Bridging loans are your secret weapon for acquiring properties that would otherwise remain out of reach, as they allow you to borrow against properties that traditional mortgages won’t touch.

The Drawbacks

Regardless of how budget-friendly your loan may be, it still comes with a price tag. This cost becomes an additional factor to consider in your property transaction, impacting your overall budget.

Navigating the landscape of fees and charges can be a tricky task. When comparing quotes from various bridging loan lenders or brokers, it’s essential to tread carefully. Beyond the lender arrangement fee and interest payments, some lenders may spring additional fees on you, such as “fund management,” “application,” or “inspection” fees. These hidden costs can accumulate, and the lowest interest rate might not necessarily translate to the best deal. When evaluating bridging loans, a comprehensive analysis of all expenses is crucial to determine the total cost, rather than relying solely on the headline figures. As a trusted bridging loan broker, we’re here to help you decipher this intricate web of charges.

The exit route becomes your guiding star as your bridging loan term draws to a close. Problems with your repayment strategy can lead to significant roadblocks. If you find yourself unable to repay the loan at the end of the term, you’ll be left with limited options – either refinance or manage monthly interest payments. However, there’s no guarantee that your lender will grant these concessions. Failure to meet these obligations can jeopardize your property and tarnish your credit score. Remember, this financing is a short-term solution, so timely repayment is of the essence to protect both your property and your financial standing.

Key Information

Apply for a bridging loan online

How does it work?

The whole process can be completed electronically, without you having to speak to us on the phone – although you’re welcome to at any point if you have any questions.

1.) Apply online

We collect all of the information necessary to provide you with asset finance indicative terms within 24 hours.

2.) We email your options

Once we’ve found you the best rates, we’ll email you with all of your options and give you time to decide.

3.) We arrange your finance

When you’re ready to proceed, we’ll arrange your agreement ready to sign and the funds will follow as soon as possible.

Bridging Loans with Bad Credit

Securing a bridging loan with bad credit can be challenging, but it’s not impossible. Traditional lenders may be hesitant to approve loans for individuals with a history of bad credit, as they consider it a risk. However, there are alternative lenders and specialised financial institutions that may be more flexible in their evaluation criteria. These lenders often focus on the value of the property involved in the transaction and may be willing to overlook a less-than-perfect credit history.

To increase your chances of obtaining a bridging loan with bad credit, consider the following:

Property Value: Lenders may prioritise the value of the property being used as collateral for the loan. If the property has significant value and equity, it could positively influence the lender’s decision.

Loan-to-Value (LTV) Ratio: A lower loan-to-value ratio (the loan amount relative to the property value) may make you a more attractive borrower. Lenders may be more willing to extend a bridging loan if the amount requested is a smaller percentage of the property’s value.

Exit Strategy: Lenders often look for a clear and viable exit strategy. If you can demonstrate a solid plan for repaying the loan, such as through property sale or refinancing, it may improve your chances of approval.

Specialised Lenders: Explore lenders who specialise in providing loans to individuals with bad credit or unique financial situations. They may have more lenient eligibility criteria compared to traditional banks.

Co-Signer or Guarantor: Having a co-signer or guarantor with a stronger credit history can strengthen your loan application. Their financial stability may reassure the lender and increase the likelihood of approval.

Before applying for a bridging loan with bad credit, it’s crucial to carefully assess your financial situation, understand the terms and conditions of the loan, and explore multiple lending options. Consulting with a financial advisor or mortgage broker specialising in bad credit situations can also provide valuable insights and guidance tailored to your specific circumstances.

Bridging Loans for Unmortgageable Properties

Securing a bridging loan for an unmortgageable property can be challenging, as traditional lenders typically have strict criteria for properties they are willing to finance. An unmortgageable property is often one that doesn’t meet standard lending requirements due to issues such as structural problems, incomplete construction, or legal complications.

However, there are specialised lenders who cater to unconventional and challenging property situations. When seeking a bridging loan for an unmortgageable property, consider the following steps:

Specialist Lenders: Look for lenders who specialise in providing financing for unmortgageable properties. These lenders may have experience dealing with unique challenges and be more willing to consider unconventional properties.

Property Assessment: Provide a detailed assessment of the property’s condition, highlighting any issues that make it unmortgageable. Be transparent about the challenges, as this can help lenders better understand the risks involved.

Exit Strategy: Develop a clear and viable exit strategy for repaying the bridging loan. Lenders are often concerned about how the loan will be repaid, so having a solid plan in place can boost your chances of approval.

Loan-to-Value (LTV) Ratio: Lenders may be more lenient if the loan amount is a lower percentage of the property’s value. A lower LTV ratio can reduce the perceived risk for the lender.

Legal Advice: Seek legal advice to address any legal issues associated with the property. Resolving legal complications can make the property more appealing to lenders.

Property Improvement Plan: If the property requires renovations or repairs, present a detailed plan for improvements. Lenders may be more willing to finance a property if they can see a clear path to making it mortgageable in the future.

Specialist Brokers: Engage the services of a mortgage broker specialising in challenging property situations. They can leverage their expertise and network to connect you with lenders who may be more receptive to your unique circumstances.

Before pursuing a bridging loan for an unmortgageable property, thoroughly research and understand the terms and conditions of the loan. Carefully assess the risks and consult with professionals, including financial advisors and legal experts, to ensure you make informed decisions aligned with your financial goals.

FAQs

How much equity must I have in my property to secure this type of funding?

You typically need a minimum of 25% equity in your property. Additional security, whether residential or commercial, can help lower this requirement.

Is it advisable to borrow money from bridging lenders?

Yes, bridging loans can be a practical solution for short-term financial needs. However, it’s essential to evaluate your unique circumstances and seek expert advice if uncertain.

Is this type of finance suitable for my needs?

To determine if it suits your needs, assess your individual circumstances, the purpose of the loan, and your repayment plan. Consult with a financial expert for guidance.

Is bridging loan approval based on my income and financial situation?

No, your exit strategy holds more significance than your income, especially if interest is added to the loan.

Can I qualify for bridging loans if I’m a retired pensioner?

Yes, these loans are often taken by retired individuals looking to downsize while awaiting the sale of their old property, especially when speed and cash flow are essential.

Can self-employed individuals secure bridging loans?

Yes, self-employed borrowers can obtain bridging loans, and most lenders accept applications from self-employed consumers.

Can I secure a bridging loan for land from your lenders?

Yes, many lenders offer bridging loans for land. However, having planning permission in place can simplify the process. Some peer-to-peer lenders specialise in land financing.