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Making Bridging Loans Cheaper

Why would you choose a bridging loan?

Bridging loans are short-term loans that are given out to individuals or businesses, typically for 12 months or less. They are also called swing loans or gap finance. This is because bridging loans are taken out to bridge the gap between when you need to pay for a purchase and the funds come in.  

Why are Bridging Loans so Popular?

Bridging loans have become increasingly popular over the years because they have several attractive features.

They are quickly arranged and put in place. This makes bridging loans suitable when finance is needed at short notice to buy property or to solve temporary cash flow problems.

Bridging loans lenient in terms of their lending criteria, so they are suitable for people with poor credit histories.

They are also the cheaper short-term financial option, compared to other types of loans.

What is a Regulated Bridging Loan?

Regulated bridging loans are secured against residential property (ie. Houses and flats), or plots of land, where the borrower currently lives or plans to live in the near future.

To be able to provide a regulated bridging loan, a bridging lender must be authorised by the Financial Conduct Authority.

In the UK, there are not many regulated bridging loan lenders. Lenders who provide regulated bridging loans can also provide non regulated bridging loans, but not vice-versa.

What can You Use Regulated Bridging Loans for?

Regulated bridging loans are used as a short-term financial solution, mostly to fund residential property purchases and renovations, where getting a mortgage would be costly and require a long time to complete.

There are other reasons to use regulated bridging loans too, as listed below:

  • To Buy a new residential property before sale of existing one
  • To fund the gap between when you buy a new residential property and the time your funds come through
  • Refurbishing your residence
  • Downsizing
  • Re-Bridging your residential property
  • To pay off debts
  • To stop repossession
  • To buy a property at auction
  • To buy an investment property
  • To fund Self build projects
  • To stop bankruptcies
  • To buy a property abroad
  • To buy a retirement home
  • To fund investment projects
  • To solve cash flow problems in a business
  • To pay inheritance tax and deal with probate

How long can you take out a regulated bridging loan for?

Bridging loans are short-term financial options, which means that the term is usually 12 months or less.

In some cases, they can be offered for 24 or 36 months. This would depend on individual cases.

What is meant by the Exit strategy of a bridging loan?

When you take out a bridging loan, the lender will want to know how you plan to repay the loan at the end of term. This is known as the exit strategy.

Bridging lenders always put emphasis on the exit strategy.   With regulated bridging loans there has to be a clear exit route. Some lenders will only accept sale of a property as the method of repayment, but most will also accept refinance. In case of using refinance as an exit strategy, it is important to make sure that the property (or land) will be eligible for re-mortgage once it has been renovated.

Bridging Finance Specialist Offers the following Facilities for Regulated Bridging Loans:

  • Rapid arrangement of loan
  • Loans from £50,000 to £10 million
  • Terms from 1 to 24 months
  • Rates from 0.40% per month
  • Up to 75% Loan to Value
  • Proof of income not required
  • Applicants with bad credit history accepted, including CCJs, Defaults and bankruptcies
  • Maximum age typically 85
  • Desktop valuations available
  • Joint legal representation available

What Can You Use as Security for Regulated Bridging Loans?

  • Houses
  • Bungalows
  • Maisonettes
  • Flats
  • Self Builds
  • Development projects
  • Restoration projects
  • Semi Commercial Properties
  • Plots of Land

What is an ‘Unregulated’ Bridging Loan?

Unregulated Bridging Loans

Unregulated bridging loans are designed for properties that are for purely investment purposes and never to be lived in by the borrower. They can be secured on investment properties like Buy-to-Lets and HMOs, semi-commercial properties (like shops with flats above) and commercial properties. They can also be secured against plots of land (like development plots or agricultural plots).

In the UK, most bridging finance providers are unregulated, which means that they are not regulated by the Financial Conduct Authority and cannot provide regulated bridging loans. Lenders can be private individuals lending out their own money or large financial institutions like banks. 

What Can You Buy with Unregulated Bridging Loans?

Unregulated bridging loans can be used to purchase the following

  • Houses or flats that are purchased to be rented out
  • Semi-Commercial properties which are usually shops with flats above
  • Plots of land like farmland or development land
  • Commercial properties

Unregulated Bridging Loan Facilities at Bridging Finance Specialist

  • Can be as quick as 2 days
  • Unregulated bridging finance from 50,000 to 1 billion
  • Term of loans between 12 to 36 months
  • Immediate decision in principle, so preventing waste of month
  • Monthly interest rates from 0.28%
  • Up to 80% LTV
  • Proof of income not required
  • Individuals, partnerships and companies eligible
  • No maximum age limit in many cases
  • Desktop valuations available in many cases
  • Joint legal representations available
  • Poor credit histories accepted
  • Non-UK residents eligible
  • Suitable for properties in the UK and abroad
  • Properties with non-standard construction accepted
  • First, second, third, equitable and unilateral charges available

What can you use unregulated bridging loans for?

  • Renovation, conversion and refurbishment
  • Solving short-term cash flow problems in a business
  • Maintaining your place in a chain during the selling and buying of property
  • Purchasing property at auction
  • For extending leases on investment properties
  • Developing property
  • Payment of inheritance tax, VAT etc
  • Preventing repossession of property
  • Refinancing an existing bridging loan
  • Expanding business
  • Refinancing properties that do not qualify for high street finance
  • Funding of quick purchases
  • Re-Bridging

What are the types of security property for unregulated bridging loans?

  • Residential property like houses, flats, maisonettes, bungalows etc
  • Property in a poor state of repair
  • Investment properties including HMOs
  • Semi commercial property
  • Properties that have non-standard construction
  • Hotels
  • Guest Houses
  • Bed and breakfasts
  • Care homes
  • Shops
  • Offices
  • Retail units
  • Leisure centres
  • Farmland
  • Parking Spaces

How does the Bridging Loan process work?

At bridging Finance specialist, our aim is to make your bridging loan application process quick and efficient, so that you can have the money in your account in the shortest possible time.

Here is how the bridging loan application process works.

1

Call us for advice

You can get in touch with us by calling us on **********. Alternatively, you can email us at *********. 

One of our bridging finance specialists will speak to you and discuss your options according to your own unique financial needs. Our advice is completely free of charge and comes with no strings attached, so feel free to get in touch with us!

2

Loan application and quote

If you are satisfied with our advice after speaking to our specialist adviser, we will make loan applications to various lenders on your behalf and get quotes for you to choose from.

3

Instruction of Valuation and Solicitors

Once you have chosen the bridging loan deal that you like, we will proceed to instructing the valuation on your behalf. Although some bridging loan deals do not require valuation, other deals do require one to be carried out.

To complete your loan application, solicitors will also have to be instructed. For a speedy completion of your loan application, the valuation and solicitors can be instructed simultaneously. If you are not too strapped for time, then the legal instruction can be done after the valuation.

4

Completion

Once the valuation is carried out and the legal matters dealt with, the loan is ready to be paid out to your bank account.

What is a commercial bridging loan?

When a bridging loan is taken out using a commercial property as security, it is known as a commercial bridging loan. This loan is available to both individuals and businesses.

What can You Use Commercial bridging loans for?

Buying property that are not eligible for mortgages with high street lenders: Traditional lenders usually do not lend against commercial properties that are in poor state of repair or of non-standard construction or also if they are meant to be demolished.

Prevention of repossession of a property: a commercial bridging loan can be used to pay off the arrear and prevent repossession by the lender.

Quick purchase of a bargain commercial property: A commercial bridging loan is ideal for snapping up bargain buys of commercial properties due to the speediness with which these loans can be arranged.  

To pay tax: Commercial bridging loans can be used to meet urgent tax demands.

To solve short-term business cash flow problem: This may happen when a business receives a large order and needs a quick injection money to buy materials and pay extra workers etc. A commercial bridging loan can be used in these cases to tide one over until the funds come in.

To pay off an overdraft: If a lender suddenly calls in an overdraft facility, a commercial bridging loan can be used to pay it off.

What are open and closed bridging loans?

The most important thing to keep in mind when taking out a bridging loan is what the exit strategy is going to be. This also depends to some extend whether the bridging loan is an open or a closed one.

Open bridging loans

In this type of bridging loan, there is no set date of repayment of the loan. In these cases, if the exit strategy is to sell the property to pay off the loan, then the borrower can sell the property at any time to pay off the loan and is not strapped for time.

Closed bridging loans

A closed bridging loan means that the loan has to be paid off at a certain date. This means that the borrower must sell the property to pay off the loan within the stipulated time, or incur a penalty.

Although lenders prefer closed loans, nowadays it does not make much of a difference t the borrower regarding the rates and costs, as the bridging market in the UK is very competitive.