Bridging Loan / Finance
Helping you to secure fast access to bridging loan funds
A bridging loan is a short term loan given to ‘Bridge the gap’ between you buying a new property and selling your previous property. They are also versatile short term loans that can be used for several financial requirements such as investing in business opportunities, buying a property at auction, property conversions and renovations and seizing investment opportunities.
The traditional use of bridging is when it acts as a bridge between selling one house and buying another. It is relevant when a buyer wants to buy a new home before they have completed the sale on their current property. A bridge may also be used to raise funds from a property that is on the market for sale, for immediate use and to be repaid when the property is sold.
Bridging loans are often used by landlords, developers and people stuck in a broken housing chain. Due to the nature of the loan, they can be expensive and it is crucial before taking out this type of finance that you know how you will repay the loan, for example through the sale of a property or with funds from a mortgage.
Whatever the reason you need access to finance quickly, We will be happy to discuss your needs and whether a bridging loan is the right solution for you or if there is another option that might suit you better
Different types of Bridging Loans
For people who want to buy a new residence before their old one is sold – therefore a financial bridge between those two transactions. This can be secured only against the property being sold or against both the existing and the new properties depending on various factors.
Property Investors looking to purchase properties not currently in a habitable condition will struggle to get mortgages from mainstream lenders. Bridging can be used to buy the property and complete the necessary renovations before moving to a standard mortgage. It is important to consider how long the refurbishment will take. Collabot Finance have a range of lenders you can remortgage to once the work is complete, even if the work has taken less than 6 months. You can speak with one of the us to establish first who will be the most cost-effective bridge lender, and then who will you be able to successfully refinance to when the work is done.
Clients without any previous experience are benefiting from access to debt structured solely against the existing value of a property, funding the works themselves before refinancing against the end value. More complex, labour intensive and Heavy Refurbishment projects structured across multi tranched facilities where elements of the original site are retained can also be financed.
The lines have become blurred in recent time between short and medium term funding with some traditional short term funders extending maximum loan terms out to 3 or even 5 years in some cases. Howevver, they tend to be priced cheaper than standard bridging, but more expensive than mainstream loans. They are used to provide time for the owner to make any arrangements they need with their finance or property to enable them to meet the mainstream lenders criteria. One example is someone who has recently started a Self-employed role and needs to build up income history before the main-stream lenders will consider a mortgage application.
Bridging can be appropriate for individuals who have a bill that needs paying immediately, such as an unexpected VAT or Tax bill. Or it can be used if you need to raise money quickly for a new purchase such as at auction or other reason such as once-in-a-lifetime business opportunity. This allows purchases to complete in a much shorter timeframe than traditional funding, and can often be measured in days rather than weeks or months. It is important to have a viable repayment solution in the coming months such as a property sale or refinance.
A normal term mortgage is based on borrowing against whatever is the lower of the purchase price or the value of the property. Where a property is being purchased below its true market (BMV), such as a repossession or auction property, some bridge lenders will consider lending on the value of the property rather than the purchase price. This could increase the loan size that may otherwise have been available.
Planning your bridge exit route
Whilst bridging represents an effective solution in many cases, it should only be seen as a short term lending product as it is priced accordingly. It is therefore essential to consider how the bridge will be repaid and how quickly you can repay it. This is often referred to as the ‘exit route’. A typical exit route will be a refinance to a mainstream term lender or the sale of the property. If you already have bridging finance and need help with replacing this, contact us now.
We will take time to evaluate all your exit options and will only recommend proceeding if we can clearly establish options for the repayment of the bridge at the end of the bridge term.