Bridging

Bridging Loans

We specialise in sourcing and arranging bridging loans for all types of business. Taking the time to fully understand your requirements, we scour the market to find you the best possible financing for your needs.

As an independent broker, we are not tied to any particular lender, so we can access the most competitive loans and, negotiate the best possible deals.

If you are looking for a short-term, flexible form of finance then a bridging loan could be ideal. Bridging finance is often the most economical form of funding over a short period of time and the flexible lending criteria means that approvals can typically be obtained quickly, without invasive checks.

Terms range from 1 month to 24 months, with loan amounts from £25,000 to multi million facilities. Bridging loans are secured using available equity in all types of property, including buildings and land that are unsuitable for conventional lending products.

The Various Different Uses of a Bridging Loan

Buying Property at Auction: When the auction hammer falls, the winning bidder is typically required to pay a 10% deposit on the day, with the remaining balance due within 28 days or sooner. This doesn’t leave enough time to put a mortgage in place, but a bridging loan can be set up quickly, ensuring you can complete on your auction purchase within the time limit.

To Keep your Sale Chain Together: Probably the most traditional use of bridging finance. If you are funding a property purchase from the proceeds of another property sale but the sale is not able to complete before or at the same time as the purchase, then this form of short-term finance can be used to bridge the gap in funding so you are still able to proceed with the purchase.

Developing a Property: Funds can be raised for property development projects using a bridging loan. However, if you are a professional property developer with a proven track record, this may not be the best option for your needs. Get in touch and we will be happy to discuss your requirements in detail.

Refurbishment, Renovation and Conversion of a Property: If a property is in very poor condition, many mortgage lenders will deem it unsuitable security for lending purposes. If your plan is to refurbish, renovate or convert a poor condition property, to sell on or refinance with a buy-to-let mortgage, then a bridging loan could be ideal as it can be secured against property that other lenders consider unsuitable.

Buying Below Value Property: Often, when an item is priced below market value the purchase needs to be completed quickly a bridging loan could help you make the purchase so you can grab a bargain. Bridging finance can be arranged quickly, secured against equity in a property and then when the item is sold on, or longer-term finance is arranged, the bridging loan can be repaid.

Quick Cash Injection for your Business: If you run a business, you’ll understand that if a bank calls in your overdraft facility, customers pay their bills late or a new order requires you to purchase equipment urgently to fulfil the contract, then you may suffer from cash flow problems. Bridging loans can help with short-term finance issues so you can keep your business running.

Stopping a Repossession: Where a property is scheduled to be repossessed, bridging finance can be used to pay off the debt and stop the repossession. This is only a short-term solution, but it gives you control so you can sell on the property on your own terms rather than face a forced sale.

Bridging Finance – The Advantages

Quick to Arrange: Traditional forms of finance such as a business loan, residential, commercial or buy-to-let mortgage can take weeks, or even months to arrange. Bridging finance can be put in place quickly, sometimes within a matter of days so if you need to raise funds quickly, a bridging loan could be ideal.

Flexible Criteria: Each bridging loan provider has their own set of lending criteria. As long as the property being used as collateral for the loan has enough equity there are lenders to cater for most circumstances.

Security can be All Types of Property: For many mainstream lenders, a building in a poor state of repair, derelict, in need of restoration, with a short lease or of non-standard construction cannot be used as security against a mortgage. Specialist bridging finance providers accept all types of property as security; houses, apartments, shops, commercial units, care homes, hotels, land, leisure complexes and mixed-use properties, no matter their condition, tenure or construction.

More than One Property can be Used as Security: A single bridging loan can utilise more than one property as security, either on a first or second charge basis or a combination of the two. For example, if you are buying a property before selling an existing property that has a mortgage in place, you may need to raise funding to cover the full asking price of the property you are purchasing. Bridging finance can take a first charge over the purchase property and additionally, a second charge over the property you are selling, providing there is available equity in the property being sold.

Bridging Finance – The Disadvantages

The monthly rate of interest for a bridging loan is high compared to other standard forms of finance. For this reason, bridging loans should only be used as a short-term facility, not over a long period of time. In addition, when considering bridging finance, you must have a clear exit strategy as the lender will insist this is in place so they feel confident you will be able to repay the loan at the end of the term.

Costs to Consider

There are many different costs that need to be taken into consideration when applying for a bridging loan. These costs can add up quickly which is why it is important that you understand all the costs involved with bridging finance, so you are able to make an informed decision. We take you through these costs below:

Interest: Usually expressed as a monthly rate, the interest charged on a bridging loan can either be rolled up, retained for deferred, meaning there are no monthly payments as the interest is paid when the loan is redeemed.

The interest rate for bridging finance may appear high compared to other types of loans, such as mortgages. This is due to, amongst other factors, the short-term nature and the speed at which a bridging facility can be put in place.

Most bridging loan lenders offer a concessionary interest rate which is applicable if you adhere to the terms agreed. If you stay within the loans repayment period and make any necessary payment on time, you will usually receive the lower interest rate. However, if you default on the loan by going over term, or missing a payment (if applicable), the lender may charge you a higher rate of interest.

The contract sets out the terms agreed and a default rate, should you not adhere to the terms, is often written into the contract. It is important that you read the contract carefully prior to signing to ensure you fully understand the financial implications should you default on the loan. Your solicitor will advise you on the obligations you will be under if you take out the loan.

Arrangement/Facility Fee: Lenders charge an arrangement/facility fee calculated on the net or gross loan amount.

Exit Fee: The majority of bridging loan lenders do not charge an exit fee but those that do, typically expect 1% of the gross loan amount to be paid upon redemption of the loan.

Legal Fees: This is to pay the lenders solicitors to draw up contracts and place a charge on the security property. The legal fee is generally deducted from the loan advance and it is in addition to the costs incurred for your own solicitor.

Administration Fee: They vary from lender to lender. The administration fee is generally deducted from the loan advance.

Valuation Fee: This fee is required by the surveyor, chosen by the lender, to value the security property prior to the loan completing. If you already have a valuation or survey report on the property, this may be acceptable to the lender, but if it isn’t, bridging finance lenders will require their own instructed valuation to take place. Valuation fees will vary depending on the type of property being valued, its location and value. The valuation fee is normally paid directly to the surveyor or lender and is usually the only upfront cost when arranging a bridging loan.

If you’re in Need of Fast Funding, Bridging is a Simple Process

Contact our experienced team to discuss your needs. We know the market so with one phone call, we can give you a good indication of the likely costs involved.

If you are happy for us to do so, we will then discuss your enquiry with the most appropriate lenders. Once detailed quotes have been sourced, we will send you what we believe to be the most suitable for your needs. All this can usually be achieved within a day or so.

When you are ready to proceed, an application form will be sent to you for completion and supporting documentation will be requested.

Once the application and supporting documentation have been returned, a valuation on the property used as security will be instructed. The vast majority of bridging loans require a valuation to be completed. If you require the funding quickly, the legal instruction can be arranged at the same time as the valuation. If the funds are less urgent, the legal instruction can be delayed until after the valuation.

When the valuation and legal work is satisfied, the lender will release the funds to your solicitor. This is also known as a drawdown, completion or pay-out.

If you’d like to find out how we can help with your bridging finance requirements, just give us a call on 01492 233 808, or drop us an email tim@coastfunding.co.uk.

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