Short-term Nature
Bridging loans are designed for short-term use, typically from 1 to 18 months.
Interest Rates
These loans come with higher interest rates because of the increased risk to the lender.
Quick Access
Need funds fast? Bridging loans can release money quickly, sometimes within just a few days.
How do people use Bridging Loans?
1. Property Purchase
Have you got your eye on a new home but haven't sold your current one yet? A bridging loan can help you buy that dream house without waiting for your existing property to sell.
2. Auction Purchases
Got your heart set on a property at auction? Bridging finance lets you act quickly to secure the purchase while you arrange longer-term financing.
3. Property Development
Planning a refurbishment or renovation project? Developers often use bridging loans to fund these projects, which can significantly increase a property's value.
4. Business Purposes
Businesses sometimes face temporary cash flow issues. Bridging loans can cover these short-term gaps while you wait for longer-term financing.
5. Chain Breaks
In the property market, things don't always go smoothly. If a property chain collapses, a bridging loan can keep your plans on track, letting you proceed with your purchase.
6. Planning Permissions
Want to boost a property's value with planning permission? Bridging finance can help you acquire the property and get the necessary permissions before refinancing with a long-term loan.
7. Un-mortgageable Properties
Are you looking at a property that's considered un-mortgageable? Bridging loans can fund the necessary renovations, allowing you to remortgage or sell the property once the work is done.
8. Probate Loans
Dealing with an inheritance can be complex, especially before probate is granted. Bridging finance lets you access funds from the estate's property to pay inheritance tax bills or other expenses.
What Lenders Look For
1. Security
Bridging loans are secured against property or other high-value assets. Lenders will need a clear valuation of the collateral.
2. Exit Strategy
A solid exit strategy is essential. Whether it's selling a property, refinancing with a long-term loan, or another funding source, lenders need to see a clear plan for repaying the loan.
3. Loan-to-Value (LTV) Ratio
Lenders typically offer bridging loans up to 70-75% of the property or asset's value.
4. Credit History
Credit checks are part of the process, but lenders might be more flexible with bridging loans. They focus more on the asset's value and your exit strategy than your credit history.
5. Interest Servicing
You'll need to show how you'll manage the interest during the loan term. Options include making monthly payments or rolling up the interest to pay at the end.
6. Proof of Income
While not as strict as mortgage lenders, bridging finance providers may still require proof of income to assess your ability to service the loan.
Final Thoughts
Bridging finance can be a fantastic tool for those needing quick access to funds for specific, short-term purposes. But remember, it comes with higher costs and risks. Having a clear exit strategy is crucial to ensure you can repay the loan within the agreed timeframe.
Ready to bridge the gap?
At L&C Mortgages, we specialise in a wide range of mortgage products, but we do not advise on bridging finance.
If you want to explore Bridging finance
To ensure you receive the best guidance and support for your project, we have partnered with Propp, an expert in specialist property finance. Propp is an award-winning specialist mortgage broker with extensive knowledge and experience to help you secure the right funding tailored to your specific needs.
Not sure if you need bridging or a traditional mortgage?
Get in touch with us at L&C, it could be worth comparing your options.
Important Note on Broker Fees
Unlike L&C Mortgages, Propp does charge a fee for its service. For expert advice on bridging loans, we recommend you contact Propp, who will clearly explain their fees and service before you commit to using them.
Specialist mortgage advice is provided by Propp, who are authorised and regulated by the Financial Conduct Authority (914408). Propp is not a part of L&C, nor is L&C a part of Propp.
L&C receives a % of the commission that our partner Propp earns. All applications are subject to lending and eligibility criteria.
Propp is a credit broker, not a lender, that works with the whole of the market and is regulated by the FCA.
