A Bridging Loan (also known as Short Term Finance) can be made available at short notice when a client is looking to move swiftly to secure a new property, or funding is urgently needed in connection with a property refinance / refurbishment.
We look to ensure complete flexibility is built in to suit individual circumstances: it may be possible to structure a transaction where either:
- interest is paid on a monthly basis over the life of the loan, as there is no capital repayment necessary during its tenor (which helps cashflow), or
- on an exceptional basis, it may be possible to structure the loan so that interest is rolled-up (i.e. added to the loan) so that there are no payments at all during the life of the loan. The advantage being cashflow is further improved, but the disadvantages are higher cost and a larger loan to repay at expiry.
How we structure the loan would depend on your individual circumstances and the policies of our panel lenders.
Please note that interest rates will be higher than a long-term mortgage to reflect the additional costs, work and risk of this kind of loan. However, you may wish to balance that extra cost against the potential benefits of accessing other properties, which might otherwise not be available to you.
A consideration with a Bridging Loan could be your longer term hopes for funding the property. We can often use a Lender who offers both Bridging Loan and traditional Mortgage Products, so that at the point the Bridging Loan is repaid with a traditional mortgage, costs are reduced as we do not need to search the wider market. This can result in a saving on both Lending Fees and Legal Costs. There are a number of lenders who offer both of these solutions and we would look choose the right lender to suit your circumstances and the type of property(ies) concerned.
The term of a Bridging Loan may be up to 18 months, usually without an “Exit Fee”.
Where we would typically use short term or bridging finance:
- Purchase / Refinance in order to refurbish or reconfigure a property;
- Where you have equity in a property and need funds for a short period;
- Purchasing a property at auction or within a short timescale;
- Properties that are ‘Un-mortgageable’ in the short term, for example where the property has no kitchen / bathroom, structural issues, short lease etc;
- Where there is opportunity to add value before refinancing onto a term mortgage, for example through a refurbishment, lease extension, change if use etc;
- As a responsible broker, we will always work with you to ensure that you have at least two possible exit routes in place. Having a secure exit and a back-up plan is vital, as not being able to exit the bridge on time can be very costly.