Bridging Finance Explained
Short term lending that is tailored to you
What is a Bridging Loan?
A bridging loan is short term finance that helps ‘bridge the gap’ while a long -term financial solution is found. The lender will not look at how much you can repay monthly, they look at your exit strategy (how you intend to repay the loan)
Here are the main ways developers repay the loan:
– Sale of a property
– Remortgage with a traditional lender
– Capital from elsewhere (another sale or loan)
The loan typically ranges from 1 month up to a year.
Here are some frequent scenarios:
Commercial & Semi-commercial Properties – Developers are often looking to purchase a commercial property under auction and will need the funds within 30 days. A commercial bridging loan would be able to fund the purchase on time unlike a commercial mortgage.
Light refurbishment – If a developer is looking to buy and sell a property, bridging finance is a quick way to gain funds and get moving on renovating the property. *This is often used to purchase an unmortgageable property. Bridging Finance will provide the funds to make the property habitable. The developer can then remortgage onto a buy to let once purchase and renovations are complete.
Refinance/ Exit Finance – This is where the developers existing bridging deal is coming to an end but has not sold the property/s. This will allow them to access a cheaper rate and extend completion term, relieving pressure on finances.
Heavy Refurbishment – This would be required for properties that have structural changes. An example is a adding a new upstairs to a bungalow that has planning permission.
If the developer is looking to secure the loan against a property that is currently occupied or will be occupied in the future, this will be classed as a regulated loan. Most bridging lenders will decline any application that fall under regulated.