Property Bridging Finance | HNW Bridging Finance Broker
How much equity do I need in my property for this type of funding?
You will need a minimum of 25% equity in your property, unless you offer the bridging lender additional security over another property, whether residential or commercial.
Loan to value is a key metric when assessing bridging loans and for this reason, deposit, or equity in the security property is key.
Is it a good idea to borrow money from bridging lenders?
Yes, a bridging loan can be a good idea if you have a short-term need to bridge the gap that requires funding.
That said, you should consider your own personal circumstances or seek specialist advice from a reputable bridging loan broker if you’re unsure whether it’s a good idea to borrow money this way.
Is this type of finance right for me?
To work out whether bridging finance is right for you, consider your personal circumstances, why you need to access funding and how you will repay it.
Seek professional advice if you’re not sure which product is best for your needs. Bridging loans are a specialist financial product, so it is important that you are sure before proceeding.
Which banks offer these loans?
The leading bridging loan lenders range from High Street Banks to Non Banks Lenders in the United Kingdom.
Is bridging based on my income and finances?
No, your chosen exit route is more important than your income when it comes to bridging loans, especially when interest is being added to the loan.
This is where bridging loans are different to other types of borrowing such as mortgages, credit cards, overdrafts or secured loans.
Will I qualify for bridging finance if I’m retired and living on pensions?
Yes, bridging loans are often taken by retired borrowers who are looking to downsize while waiting to sell their old home, especially where speed and cashflow are important.
Will I qualify for bridging if I’m self-employed?
Yes, we can offer a bridging loan to self-employed borrowers. Applications from self-employed consumers is common and offered by most lenders.
Can I access bridging loans on land from your lenders?
Yes, many lenders offer a bridging loan on land, although it will be much simpler if planning permission is in place. Some peer-to-peer lenders are stronger in this area.
We work with lenders from across the market to ensure we can offer the greatest access to funding methods for a wide range of customers. Eligibility for our loans can be determined by talking to our team of broker experts.
What are the arrangement fees associated with bridge financing?
Arrangement fees for bridging loans can vary depending on the bridging loan provider and the specific loan terms. These fees depend on the lending package and are typically calculated as a percentage of the bridging loan amount. Typical arrangement fees are 0.5-2% of the borrowing facility.
A decision must be made about the total cost of loan cost when financing. You could face a facility fee, drawdown fee, admin fee, repayment fees and broker fees. While we at Platinum Global Bridging Finance offer a great service at low cost, many lenders can and do charge high fees.
Always consult with your bridging loan broker or adviser to get a clear indication of the fees and how they will affect your cash flow and project finances.
How can a bridge loan help with property chain completion?
Bridging loans are a key financing tool for those in a property chain, which allow applicants to access the necessary funds to complete their property purchase while waiting for the sale of their current home.
This ensures that they don’t miss out on your next house or property investment opportunity due to delays with a mortgage provider.
Bridging loan providers typically offer flexible loan terms that can be tailored to fit the specific situation of property chains, reducing risks and facilitating a smooth transaction for buyers and investors alike.
The speed and flexibility of bridging loans allows a fast, hassle-free way to repair a property chain that is at risk of failure.
Can a bridging loan be used for auction purchases?
Yes, bridging loans are often used by property investors and developers for auction purchases. The short duration of the application process and quick access to funds make bridging loans the ideal choice for purchasing property at auction where a fast completion times is key.
When planning to use a bridging loan for this purpose, it is crucial to have a clear exit plan in place, such as refinancing or the resale of the property, to repay the loan within the agreed term.
Consulting with a credit broker or bridging loan broker can provide valuable tips and guidance to ensure that the financing meets the requirements of your auction purchase.
Bridging loans for an auction purchase is known as auction finance.
Will base rate cuts make bridge loans cheaper?
When lenders refer to a base rate they are referring to the Bank of England interest rate. Lenders tend to follow the base rate, increasing and decreasing loan interest as the base rate rises and falls.
If the base rate is cut then lenders are likely to lower Annual Percentage Rates (APRs) making borrowing cheaper. Bridging loans often have higher APRs than other loans and so any cut to the base rate will be beneficial in this market.
Not all lenders choose to immediately drop their rates, especially if the base rate reduction is small. As a general rule, however, base rate cuts are beneficial to borrowers.
Does a bridging loan lender ensure that my consumer rights are safe, like a mortgage, secured loan, remortgage overdraft or credit cards?
Regulated bridging loans up to 75% of a property’s value are regulated by the Financial Conduct Authority. The FCA supports consumers and covers loans in the same way it covers products such as credit cards and other banking products. If poor advice has been given the FCA can help a consumer secure compensation and take action against the seller.
Is property investment the most common reason to take bridge loans?
Property investment is now the main use for bridging finance although it originated in the residential sector to help fund property purchases before a borrower had sold their own home. Today, bridging loans are a popular form of fast and flexible funding for investors who are often working on renovating several properties at a time.
Can you get a mortgage on an auction property?
It is unlikely you will get a mortgage on a property purchased at auction. When a property sells at auction the terms of the sale ordinarily require that a deposit is paid on the day and the rest of the funds are paid within 28 days. Mortgages tend to take longer than a month to complete and involve detailed surveys and checks. Additionally, often auction properties are in a state of disrepair and so it is unlikely a mortgage provider would provide a loan in this situation.
Can you buy an auction property with a bridging loan?
Yes, bridging loans are often used by property investors and developers for auction purchases. The short duration of the application process and quick access to funds make bridging loans the ideal choice for purchasing property at auction where a fast completion time is key.
When planning to use a bridging loan for this purpose, it is crucial to have a clear exit plan in place, such as refinancing or the resale of the property, to repay the loan within the agreed term.
Consulting with a credit broker or bridging loan broker can provide valuable tips and guidance to ensure that the financing meets the requirements of your auction purchase.
Bridging loans for an auction purchase is known as auction finance
With bridging finance being more expensive than more traditional options like mortgages, why would people choose to use them?
Bridging loans allow you to profit from property owing to their flexibility and ability to be secured against properties that traditional mortgage lenders would not consider, such as inhabitable properties. They are perfect for investors or those who need to complete a deal quickly. Whilst bridging loans have higher interest rates than mortgages, they are only needed for a short amount of time and so overall can be a very helpful option to access fast funding.
Can I use a bridging loan for a buy to let property?
Buy to let investors often use bridging loans, as they often have a number of properties and can secure a loan against one or more of their properties to obtain the finance they need to buy more properties. If properties need refurbishment or renovation they can be purchased with a bridging loan and then when they are in a fit state to be rented the owner can secure a mortgage on the property and exit the bridging loan.
How will the mortgage credit directive affect mixed-use properties?
The Mortgage Credit Directive is European legislation that sets out rules to ensure that all mortgage lenders act in the same way irrespective of where they are based. The aim is to protect consumers from misleading practice and enable them to compare products.
A mixed use property is a property that is used for residential and commercial purposes. For example, a shop that has a residential flat above it would be a mixed use property.
The Mortgage Credit Directive does not apply to residential properties used for business purposes such as buy to let properties.
Are bridging loans available nationwide?
Yes, however the regulations around bridging loans can vary slightly between different pages of the United Kingdom.
How much equity do I need for bridge finance?
Typically you need a minimum of 25% equity in the property you are using as security although this can vary depending on the type of property and your circumstances. Deposits can be as high as 30% or 40% for commercial properties. Additional properties, or assets can be used to increase the loan amount if a lump sum of cash is not available.
If exit fees apply are they based on the loan amount?
Exit fees are normally around 1-2% of the loan amount, or a month’s interest. Exit fees are not always charged but when they are it will be payable whenever the loan is repaid whether that is early, on time or late.
An exit fee is often confused with early repayment charges, these are sometimes applied if a loan is paid back sooner than agreed.
Fees can make a significant difference to the total cost of a loan and the details of all the costs and fees that apply will be outlined in your bridging loan offer letter.
Do I need proof of income for a bridging loan?
When interest payments are ‘rolled up’ and paid at the end of the loan term then proof of income is not required. In some situations, where interest is paid on a monthly basis then proof of income may be required.
Can I use a bridging loan for business bills or tax bills?
Yes, you can use a bridging loan to pay your HMRC bill or business bills; however, there are a number of loan products available including specific loans for tax. Get in touch with your provider for options.
How can you speed up the bridging loan process?
You can speed up the bridging loan process by speaking to a specialist broker and letting them know that you are looking for fast finance. We can arrange terms from £50,000 to £250m within 24 to 48 hours.
Your broker will work to find you lenders that can provide fast funding, and some bridging loans can be arranged within days.
A broker will know what checks and paperwork are required, and advise on the stages of the process that are mandatory and those that are optional, such as surveys.
Should I use a solicitor for a bridging loan?
The legal system varies throughout the UK and different rules apply to property sales in England, Northern Ireland, Scotland and Wales. Using a solicitor with experience in bridging loans can help speed up the process.
Are bridging loans FCA regulated?
Yes, bridging loans are regulated by the Financial Conduct Authority up to 75% in the United Kingdom for residential properties. This gives the buyer protection from being mis-sold a loan. Loans beyond 75% are available but not regulated, these are known as unregulated loans and carry a higher risk, therefore the interest rates on unregulated loans are ordinarily higher.
What is the repayment period on a bridging loan?
For a residential property the repayment period is 12 months, this can be extended for commercial properties such a buy to let where repayment periods can be up to 24 months, however, bridging loans are short-term financial tools and not designed for longer term use.
Do bridging loans require credit checks?
Most lenders won’t use credit checks for buy to let bridges; however, a bridging loan requires a deposit and security in the form of a property and so your personal credit history is not often a deciding factor when applying for a bridging loan.
You can apply for a bridge loan even if you have defaults, CCJs, mortgage arrears, IVAs, debt management plans and even previous bankruptcy.