Bridging Loan for a House Extension: A Comprehensive Guide

By Georgia Galloway | Thursday 7th September 2023 | 3 minute read

Whether you're a property developer or homeowner, a bridging loan for an extension can be an invaluable financial tool. This short-term finance solution is designed to 'bridge' the gap between needing funds for your project and having the means to repay.

So if you're looking to complete a house extension, but don't have the funds to complete the project, a bridging loan can help.

A bridging loan for a house or property extension offers flexibility that traditional lenders often cannot match. It's not just about the speed of approval; these loans also provide terms tailored to suit your circumstances.

The loan amount can range from £26k to millions, providing ample funding for small-scale home improvements and larger developments. The key advantage? Bridging Loans For Extension can be secured within a few working days, making them an ideal option for quick financing of extension projects.

House Extension for Modern Kitchen in Classic British House

Bridging Loans Explained

A bridging loan is a short-term financial solution that can help cover the gap between buying and selling properties, often used by individuals, limited companies, and partnerships. It's an option often favoured by various borrowers - from individuals to limited companies and partnerships.

Open vs Closed Bridging Loans

An open bridging loan doesn't come with a fixed repayment date but typically needs settling within 12 months. This bridging loan offers flexibility for those unsure about when they'll have funds ready for repayment.

In contrast, a closed bridging loan has an agreed end date or term where all borrowed money must be repaid. These are usually shorter than their open counterparts, generally lasting around three months or less.

Regulated vs Unregulated Loans

Certain types of bridge financing, like regulated loans, fall under the purview of The Financial Conduct Authority (FCA). They aim to shield consumers from potential risks associated with such borrowing terms.

On the other hand, unregulated loans finance trickier situations like purchasing land without planning permission or dealing with properties with only short leases left on them - scenarios traditional lenders might shy away from due to perceived risk factors involved in lending against these assets. 

Why Choose a Bridging Loan for an Extension?

In property development and investment, securing swift funding is often as critical as having sufficient capital. Traditional finance options can be sluggish to secure, potentially causing project delays or missed opportunities. Herein lies the value of bridging loans.

Quick Approval Times

The rapid approval times associated with bridging finance make it stand out from traditional lenders, who may take weeks or months to approve a loan application. In contrast, decisions on extension bridging loans are typically reached within 5-7 working days.

This speed becomes pivotal when embarking on an extension that requires immediate financing - such as when planning permission has been secured. Still, funds need to be swiftly accessed before permits expire. This short-term financial solution ensures your projects proceed without delay.

Flexible Terms

Beyond quick approvals, another advantage of opting for a bridging loan for extensions resides in their flexible terms. Unlike conventional mortgages with rigid repayment schedules spanning years or decades, bridge loans offer flexibility with shorter terms, typically between 1 and 24 months.

This adaptability provides borrowers with greater control over their financial commitments. It allows them better alignment with cash flow cycles than longer-term alternatives might permit - especially beneficial considering income streams during construction projects can fluctuate based on progress and sales activity levels throughout the year.

Leveraging Equity from Your Property

When considering a bridging loan to fund your home extension project, leveraging the equity from your property is a key aspect. Equity is the difference between your home's current market value and your mortgage's outstanding balance.

Lenders will assess the value of your property and the amount you still owe on your mortgage to determine the equity available. The more equity you have, the higher the potential loan amount you can secure. Bridging loans are usually offered as a percentage of the equity in your property. This percentage can vary based on factors such as the lender's policies and your creditworthiness.

How Does a Bridging Loan Work for Extensions?

A bridging loan is an efficient financial tool that provides the necessary funding to extend your residential or commercial property. The process of acquiring this type of short-term finance involves several stages.

The Application Process

The first step in securing a bridging loan requires completing an application form detailing specifics about your project. Information regarding the property's location, current market value, and proposed extension details, such as cost estimates and projected completion dates, are essential.

Lenders then review these applications, assessing potential return on investment (ROI) and risk level before deciding whether they can offer financing. Unlike traditional mortgage applications, which may take weeks or even months, approval times with bridge loans could be within 5-7 working days once all required information has been submitted correctly.

We're experienced financial specialists who arrange short-term bridging loans for property owners, securing you the best deal from over 200 bridging loan providers, including private investors and family offices.

Get expert assistance today; we're on hand to answer any questions about bridging loans.

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Call our friendly team on 01202 612934, we're ready to help.

Bridging Loan for a House Extension FAQs

Can I take a loan out for an extension?

Absolutely. Various loans, including personal loans, home equity lines of credit, or even bridging loans, can be used to finance property extensions.

How can I raise money for an extension?

You could consider savings, remortgaging your property, applying for government grants, or securing financing through personal or bridge financing options.

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