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If you’re looking to purchase a property at auction – perhaps to refurbish, or to acquire the land to build upon – then you may need finance to complete the transaction.
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In essence, a bridging loan is frequently the preferred option when a property buyer wants to quickly access funds to acquire a house with the least amount of time, stress, and paperwork. Everyone from people wishing to assist a residential real estate transaction to developers and enterprises looking to manage huge and complicated commercial property portfolios utilise property bridging loans. This includes individuals, companies, trusts, and businesses.
Depending on your situation, a property bridging financing company can recommend a different type of bridging loan, such as auction finance. Bridging loans can be used for a variety of purposes, including the purchase or renovation of a primary residence, second home, investment property, or commercial building. These loans are complex and sophisticated, so they should only be taken out by borrowers who are familiar with its characteristics, know exactly what they want to use the money for, and have a solid plan for how to get out of the loan in the end.
Property bridging loans are both specialist in nature and flexible in their application. The following examples illustrate how they can be used:
We work with a respected panel of experienced lenders with a great track record in the field. This means that our clients gain access to the best rates and loan products from lenders that they can trust.
We pride ourselves on offering a fast and efficient service. It takes just a few minutes for us to gather our initial information in order to gather quotes from interested development lenders for your finance. We can obtain your loan offers typically within the hour. Once you have chosen your preferred loan and wish to go ahead, it takes an average of 7 days to arrange your bridging loan, but we also work with lenders who can provide them on a faster basis. Need an immediate bridging loan? Call us today for a rapid solution.
Most bridging loans simply aren’t available on the open market, as these are specialist products and many bridging finance companies prefer to go via brokers for the value-add role that they provide. If you are looking for bridging finance in the UK, then Hank Zarihs Associates can gain you access to the widest range of attractive loans, including deals that you wouldn’t find if you searched direct..
Whether you need a bridging loan to buy a property at auction, to bridge the financial gap between a residential or commercial property purchase and sale, or to give you time to renovate a property deemed unfit for habitation before you obtain a standard mortgage, our panel of lenders offers different types of bridging finance for all needs and objectives.
Looking for a bridging loan example? Our bridging loan calculator makes it easy to get an idea of how much your loan could cost. Simply add basic information into the online calculator fields to get an indication of how much your finance could cost. Our bridging loan calculator is available 24/7 to get an idea of the costs involved – but our team can work rapidly to get you a tailored illustration of the best deals currently available to you.
See which type of loan might be best for your needs:
Borrowers will need a deposit and around 25% is typical, although different lenders will have different requirements. The higher the LTV, the more expensive the loan is likely to be. Conversely, a bridging loan with a 50% LTV will typically attract an interest rate of between 0.43% to 0.55% a month (for a residential loan including light refurbishment – commercial loans tend to have higher interest rates.) Some lenders may offer a 100% bridging loan LTV if alternative collateral (security) can be provided – perhaps in the form of another property.
A bridging loan is a form of short-term finance, designed to last for months rather than years. This means that it has a higher rate of interest than a standard mortgage, which is often set to last for around 25 years. Borrowers must be aware of the short-term nature of these deals and recognise that the interest rate is also illustrated on a monthly basis. Again, this differs from standard mortgages which are expressed in terms of annual interest rates (APRs). Expect to pay significantly more for your bridging loan on the basis that it is short in nature and designed to be rapidly repaid by a property sale, organisation of a longer-term, standard mortgage or another exit strategy.
As we mentioned above, bridging finance is short-term in nature and will only be organised for a short, interim period – typically up to a maximum of 24 months. This means that it must be repaid at the agreed time, or it will become extremely expensive. These products are for experienced borrowers who understand the risks involved with short-term finance, and the costs involved. We gather all of our client’s bespoke bridging loan requirements to recommend only the most appropriate financial products for their needs.
Lenders will want to see a clear exit strategy before they extend an offer for bridging finance – especially for larger loans which may be needed to purchase commercial property or HMOs. The exit strategy could involve selling the property for cash which repays the loan or securing a more appropriate long-term mortgage on the property. It could also involve selling another form of security (such as another property for a developer with a portfolio.) Hank Zarihs Associates can help you to present your exit strategy as part of a compelling case, which makes lenders more likely to extend an offer of bridging finance at favourable terms
Typically, most applicants for a bridging loan will choose not to have monthly payments, although these can be serviced on a monthly basis like a regular mortgage. There are other options for servicing the interest portion for the loan, such as by having it discounted from the principal at the point of lending, or by rolling it up to pay at the point where the loan is repaid. Again, we can help you to find the most appropriate repayment schedule for your needs and exit strategy.
Hank Zarihs Associates streamlines your financing journey with tailored solutions, fast approvals, and expert guidance, connecting you to trusted lenders for project success
The borrower will need to be able to evidence a clear exit strategy that will repay the bridging finance on the due date. We can help you to present your exit strategy and project information in the best possible way so that lenders can rapidly review it for quick bridging finance offers.
As mentioned previously, this type of loan is for experienced borrowers with a track record in the field, especially as the sums on offer can be very high indeed for large commercial projects. Bridging loans can easily be abused or used incorrectly – resulting in incredibly expensive situations where the loan continues beyond its redemption date, racking up interest and late-payment fees.
We provide all the necessary information to our clients to make the best possible decision about the right type of finance for their project and needs.
Most property bridging lenders prefer to work with a broker as it makes their processes faster and more efficient. A broker knows how to package up applications in the best possible way for lenders to review, and can smooth out the application process so that the bridging loan can be organised and completed in the shortest possible time. For this reason, most lenders will only offer their best rates via brokers.
Hank Zarihs Associates works with an excellent panel of lenders to provide highly competitive rates and flexible bridging loans to our clients, with deals completing in a week on average (but with some lenders able to complete within three days, or even faster than this if the client requires speed as a priority. For instances where you require a bridging loan completion date within just a few days, please call us immediately to get the ball rolling.)
No matter how complex, as a leading development finance broker, we can help you get a bridging loan! Contact us today on +44 (0) 20 3889 4403 to speak to our team from 9 am to 9 pm, Monday to Friday. Alternatively, we can call you back at a time that suits your schedule – if you prefer this, please complete the web callback form and we will get in touch to progress your bridging loan without delay.
You may have heard about bridging loans in the context of property investment or moving house, but what exactly are they? Basically, bridging finance is a type of short-term loan that allows a buyer to purchase a property before their existing home or investment property is sold. As the name suggests, it ‘bridges’ the funding gap in the lag between purchase and sale – offering rapid access to the necessary purchase funds for a brief period of time.
Borrowers can access from £5,000 to £250 million, depending on applicant status, the value of the property and other lender criteria. Higher lending amounts are typically reserved for borrowers who can put up several properties as security. Quotes are provided on a Loan to Value (LTV) of 65%-80% in most situations.
The bridging finance market has grown rapidly, with a number of small and focused lenders now on the market, catering for specialist property finance needs. The market has changed because large high-street lenders have become less willing (and sometimes less able) to lend ever since the financial crisis of 2008.
As to whether a bridging loan for property development, auction purchase or private home buying is a good idea, it depends on a variety of factors. Bridging loan requirements vary by lender, but each will have certain common features that need to be considered.
The most notable feature of this type of finance is that the interest rate is likely to be high. At the same time, there are typically high administration fees applied to the loan. Because of this, it is essential to proceed very carefully and with a full view of the facts. Borrowers have been burned by this type of loan in the past, in instances where transactions have fallen through, or where lenders have turned out to be unscrupulous and untrustworthy.
Benefits of instant bridging loans
1. Rapid access to money
2. Ability to borrow large sums – often up to £250 million depending on applicant status
3. Options for flexible borrowing.
Possible downsides of bridging loans:
1. Failure to understand the unique features of these loans can result in financial risk
2. Bridging finance is secured against your property; meaning it can be sold if you can’t meet the repayment terms
3. A costly option with fees and higher interest
Bridging finance interest rates will vary by lender. However, interest costs of 1.5% a month are not unusual, which can equate to an annual percentage rate of 18%.
Bridging loans may have fixed or variable interest rate features. Fixed interest rates are ideal for customers who want stability, as they offer the same amount of interest for the duration of the term. The rate is pre-agreed, but there may be a premium for this security.
The other choice is to have a variable rate bridging loan which can change with the base rate. However, you can save money if the base rate decreases. Borrowers who are less concerned about security sometimes prefer the variable rate option if they believe that the financial markets will travel in their favour. Knowledge and market insight is required here, along with a thorough understanding of personal risk tolerance. If interest rates appear to be rising, most customers will choose the fixed interest rate to lock it in and avoid further increases in the event of a base rate rise.
Bridging loan periods tend to be for several months and there are usually different options for paying the interest portion.
Monthly repayments
The customer repays the interest every month as a separate payment, rather than adding it to the outstanding balance
Rolled-up bridging finance deals
The compound interest is calculated monthly but added to the outstanding loan balance and paid together when repayment is due.
Retained interest
The monthly interest payment due is covered up to a predefined date so that the full sum is only repaid when monies are due.
As well as interest payments, there will be an arrangement fee for the set-up of the bridging loan, which is usually around 1-2%. A repayment fee for exit paperwork may also apply, along with valuation fees for the cost of the surveyor.
Remember, this type of finance is designed to be short-term. As soon as it extends beyond the agreed interim or bridging period, penalties can rapidly stack up. Typically, bridging finance is available for 1 – 18 months.
Yes, there are two broad types: closed bridging finance and open bridging finance.
With closed bridging finance you will tell the lender how you will repay the loan – with what funds and when. These loans usually complete within a few months and the clear exit plan is required as a lending condition.
Open bridge finance won’t usually need this type of exit plan, and it is typically the loan of choice when funds are needed urgently to complete a property transaction. No detailed plan is needed to explain how the debt will be settled, and the finance tends to be offered for up to a year. Of course, it’s important to note that interest will keep being applied throughout this period.
There are also first charge bridging loans and second charge bridging loans.
If you have a loan against a property which is already mortgaged, you’d take out a second charge loan. An example of this would be if you were planning to finance a property extension to improve the property. The categorisation tells the lenders who will have legal priority for repayment if the loan was unable to be paid off at the term-end.
First charge loans apply if the new loan is the first secured on the property.
Bridging loan requirements will depend on the lender. Often, lenders will require that:
Customers must also take out their property mortgage with them too, providing the bridge finance as an interim measure before the standard mortgage comes into play.
Property is put forward as security against the loan. Some lenders expect applicants to have more than one property in order to be eligible for their bridging finance products, but this will depend on the lender and the size of the loan.
Applicants show proof of income – although, interestingly, as loan interest isn’t repaid monthly, some lenders do not request this.
The applicant shows evidence of their property investment track record if they are planning to develop their purchased property.
The applicant can show a business plan if they are using the bridging loan for commercial purposes.
Development loans are another type of short-term property development loan. They are repaid in stages and calculated on the gross value of the development. Personal loans are another option, as are remortgages when timescales are more flexible and a long-term loan is desirable.
Use a bridge loan calculator
Ask for your lender to provide a tailored bridge finance example or illustration around your particular borrowing needs.
Think carefully about the type of bridging loan that you need – whether open bridge finance or closed bridge finance.
Know whether the loan is a first or second charge type.
Clarify whether the interest rate is fixed or variable.
Review products from several lenders.
Be clear on your security.
Read the small print!
Bridging loans are offered by banks, building societies, specialist lenders and brokers. They aren’t widely advertised and usually require a direct application by the customer to find out the product features and offers.
Once you have made an application, a decision will usually be made within 24 hours. The funds then will take around two weeks to be issued, including time for checks to be carried out, the valuation and the actual transfer.
Hank Zarihs are highly experienced and specialist financial intermediaries operating in the property development market. We work with a tried and tested panel of over 60 trusted lenders and can provide excellent bridging finance with attractive features. Contact us to find out more.
Hank Zarihs Associates streamlines your financing journey with tailored solutions, fast approvals, and expert guidance, connecting you to trusted lenders for project success
