Bridging Finance

Fast & flexible bridging finance loans can solve many property dilemmas.

Bridging… the past to the present
In the not too distant past the very mention of “bridging loan” could induce a financial panic attack. It would be fair to say that this niche sector of lending had an image problem – limited product choice, sky high rates and a lack of transparency on terms and conditions. Thankfully, the ever growing diversity and competitiveness of the UK mortgage market has encouraged more forward thinking lenders into the bridging finance market which has lead to more innovative, competitive products.

It must still be stressed however, a bridging loan is not designed to be a long term funding solution and should still be looked on as a ‘deal saver’ – providing rapid liquidity to save some form of property transaction from falling through, or stave off the enforcement of insolvency type proceedings such as bankruptcy or property repossession.

There are two types of bridging loan, open and closed. Closed is over an agreed set period of time, whereupon the loan must be repaid. Open bridging is where there is no set end date on the loan. Rates and fees are generally higher with the open option.

The cost of bridging finance is significantly higher than traditional mortgage lending but in addition to securing a keen interest rate it is important to make a full appraisal of all potential costs and / or conditions:

• Rate of interest charged
• Stepped Rate clauses
• Lender’s minimum term of loan
• Lender’s entrance and exit fees
• Valuation fee
• Legal fees – borrower may have to pay own + lender’s legal costs
• Redemption penalties / interest in closing month
• Lender service – speed of funds availability

Possible Bridging Finance Scenarios
Traditionally, bridging loans spring to mind where a domestic property chain has broken down – one party has lost their buyer but still wants to complete on their intended new property. Bridging finance can also be a quick, flexible solution in these scenarios:

• Buying property at / after auction – complete within 28 days then remortgage
• Un-mortgageable property – purchase, renovate then remortgage
• Property offered below market value / with a completion deadline
• Land / Development projects - refinance after gaining FPP / part developing
• Credit Repair – discharge bankruptcy, clear IVA’s, stave off bankruptcy or repossession. Payments can be rolled up to improve cashflow / mortgage payments funded to repair arrears profile. Remortgage on better rates
• Capital raising awaiting probate
• Capital raising to meet Inheritance Tax
• Business acquisition/ expansion / management buy-outs
• Contract races
• Short term property development funding
• Mortgage retentions – survey leads to part retention of funds by lender

Lender Requirements
Bridging finance is usually subject to four areas of appraisal:

1. Reason for the loan – does it make sound commercial sense?
2. Affordability to make the scheme repayments
3. Exit strategy / redemption route
4. Loan to value required / value of security offered

Key Features of Bridging Finance
>Fast completion – average of one working week, less in exceptional cases
>Private borrower, Sole Trader, Partnerships, Limited Companies
>Adverse credit accommodated
>Up to 100% loan to value – subject to criteria
>Lending based on open market value not purchase price
>Up to £12M – subject to criteria
>Interest roll-up, payment deduction & deferred payment options available
>Exit mortgage arranged as part of the Mortgage of Choice Service

Please note that bridging loans are referred to preferred suppliers and Mortgage of Choice is not responsible for their advice. As regulated mortgage brokers we hold as paramount the interests of our customers and seek to provide them with access to as broad a range of lenders as possible. Bridging loans are not regulated by the Financial Services Authority.  

CAN WE HELP YOU SECURE A BRIDGING FINANCE SOLUTION?

0800 988 1889  enquiries@mortgageofchoice.co.ukEnquiry Form