Bridging Loan FAQ

Find answers to FAQs about bridging loans and development finance. This is the 101 guide to bridging loans—everything you need to know if you're considering bridge or development finance.

What is a bridge loan?

A bridge loan, or bridging loan, is a type of short-term funding over terms of between 1-24 months used to finance the gap between a purchase & arranging or being able to arrange a longer-term source of finance. 

This type of lending is most commonly used to fund an individual’s property needs amongst the real estate market where they may be seeking funding to buy a house for example, whilst waiting for the sale of another to go through.

Bridging loans can be used for lots of reasons but most commonly used for buying properties, developing, renovations or refurbishing properties, buy-to-let investments, tax bills, business ventures & divorce settlements. Bridging loans are also used by those in the property development business who need to make large secured payments at short notice such as auction purchases.

What's development financing?

Development finance form the base of what most property developers use to fund different large scale projects.

For example if a developer owns a site complete with planning permission to build a block of flats they could use a development financing to not only spread the costs over the duration of the build but gather the funds needed to complete the project more quickly & efficiently.

The loan is fully paid off after the term length through either the sale of the flat block, individual flats or by moving the debt onto a longer term finance agreement such as a commercial mortgage.

What LTVs do you offer?

Whilst our normal LTV is usually up to 80% as a 1st charge, in some circumstances its possible for us to fund up to 100% with additional security, such as a second property, to achieve the loan amount you require. 

Our standard LTVs are as follows:

  • Development finance - up to 75% LTV (100% Funding with extra security) & 100% Build cost funded
  • Residential property - up to 80% LTV
  • Commercial property - up to  65% LTV
  • Land with planning - up to 70% LTV
  • Land without planning - up to 50% LTV

You can find out more about our bridging loan rates or arrange a call with us to discuss your specific requirements.

What terms do you offer?

Most bridging loans taken out with us are for a period of 1 month up to 24 months, however we're flexible so if your requirements differ then its worth getting in touch.

What's meant by exit?

An exit is simply how you intend to repay the loan. In most circumstances bridging loans and development finance are repaid by the following methods:

  1. Sale of the property;
  2. Refinancing with another bridging loan or development finance (mainly in refurb/development scenarios) to obtain either a longer term to complete the build or to allow more time to sell;
  3. Arranging a longer term finance solution such as a traditional mortgage.

Who do we lend to?

Our loans are currently available to individuals, companies, SPVs, trusts and other organisations that have property assets within the United Kingdom. We're able to provide our loans to both UK and foreign nationals.

What's involved in the application?

As bridging finance brokers ourselves, its our job to make the process as easy for a borrower as possible.

We'll ensure we understand your situation and circumstances, completing your bridging loan application documentation on your behalf.

Is a bad credit an issue?

No, generally speaking an adverse credit history is not an issue. We're able to lend where the borrower has bad, adverse or no credit history. Remember we make our lending decisions on a case by case basis and your specific circumstances and will always try and secure the funding you need.

What fees can you expect?

This part of the process is entirely dependent on the circumstances of the bridging loan but interest is not the only fee to expect using bridging finance.

There are some others that a borrower may come across including:

  • Arrangement or facility fees
  • Exit fees
  • Admin/ repayment fees
  • Legal fees
  • Valuation fees
  • Broker fees

But as you’d expect amongst healthy competition these fees vary from lender to lender but our team is on hand to help explain any complex terms & conditions to help you decide the best loan for your needs.

Which loans right for me?

Before you start to begin comparing bridging loan options it is important to think about several factors which will in turn affect the type of loan you’ll be able to take out.

These include:

How much you need to borrow:
Bridging finance offers loan amounts of as little as £25,000 all the way up to £25 million & beyond.

How much the asset or group of assets you have is worth:
This will dictate how much you’ll be able to borrow as well as the kind of interest rates you’ll be offered.

The duration of the loan:
Bridging finance offers arrangements as short as a month or as much as 2 years.

Whether there is a mortgage on the property:
This will also affect your available loan amount.

What are survey fees?

Your lender will require a survey to be carried out on the property you’re using a security.

You'll have to pay for that survey. The lender will select the surveyor from their own panel. On some transactions worth £1,000,000 or less, some lenders will use a desktop valuation service.

These are often cheaper and faster than traditional in-person valuations.

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