Find answers to FAQs about bridging loans & development finance. Its the 101 guide to bridging loans - everything you need to know if you're considering bridge or development finance.
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.
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 for themselves or the company 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.
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
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.
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:
- Sale of the property;
- 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
- Arranging a longer term finance solution such as a traditional mortgage.
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.
As 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 loan application documentation on your behalf.
No, not generally speaking its 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.
This part of the process is entirely dependent on the circumstances of the 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.
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.
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 rates you’ll have.
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.
Your lender will require a survey to be carried out on the property you’re purchasing on a first charge loan or the property/properties you’re using a security on a second charge loan.
You will 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, many lenders are now using a desktop valuation service which is often cheaper and faster than traditional valuations.