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.
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:
- Monthly Payments – The lender will calculate the interest payable and this will have to be serviced by monthly payments as a normal mortgage.
- Interest Rolled Up – The interest will be compounded each month until the balance of the loan is redeemed in full.
- 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.
Things To Consider
There are several things you need to think about before applying for your bridging finance. These involve:
- The cost of obtaining a bridge including the arrangement and valuation fees plus admin charges.
- The length of time you require the bridge for – It’s a good idea to add on an additional two months onto the term. This gives you extra time to complete your exit without incurring a higher default rate, and if you complete early you can always be refunded.
- Determining what your exit is before getting into a bridge, as lenders tend to ask this upfront. Being clear on this will allow us to put this in place from the very beginning. Exits or redeeming the bridge will usually take the form of re-mortgaging onto a residential or BTL mortgage or selling the asset unless you have access to funds available to pay this off.
Belgravia as a company has a wealth of experience in this area of finance. Over the years we’ve helped lots of individuals and businesses acquire property, both commercial and residential. We have access to private funds, so our advice is entirely based upon your needs and requirements.
Our advisors bring insight and expertise to the equation, ensuring you achieve the right bridging finance to help you make the acquisition. And remember – the short- term loan ensures you get the necessary funds to move your acquisition forward.
As long as you have a genuine purpose with a loan request in mind, we can help you with an intelligently structured and attractive package. You could get a decision today after contacting our customer representatives.