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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.
75%
1 Year
5%
Daily
25 Years
£250k
£100M+
OMV
The market for commercial bridging loans and financing has expanded significantly in recent years due to the government successively introducing new legislation to make it easier for developers to acquire land to build houses on. Commercial bridging loans and bridging loans more generally have therefore become an easier form of financing to access. In the commercial market it tends to cater more towards commercial borrowers and businesses with bridging loans, as bridging loans tend to be the most suitable option.
With the government’s pledge to build hundreds of thousands of new property each year it was necessary for them to make the process of purchasing and developing land easier as well as the planning process.
In the commercial loan space it would appear that a bridging loan has become the most popular of the options available to developers due to its flexibility and relative speed when it comes to accessing quick finance. The very nature of property development is one of speed and uncertainty which means that often, developers and clients need quick access to a loan or funds.
Bridging loans of this type are especially popular with commercial property developers as they’re specialised and designed specifically for these types of projects. Most of our panel of lenders are highly experienced in this type of finance and, as such, are able to approve applications for bridging loans as quickly as possibly in comparison to other types of commercial lender who may need to see lots of paperwork and admin.
For example, when applying for a mortgage this can be a lengthy and stressful process, whereas bridging loans can often offer a perfect solution to this.
A commercial bridging loan is quite simply a short term lending option that is secured against commercial property or development land or farmland. It’s a specific kind of lending facility designed for commercial developers that allows them the flexibility to raise funds quickly and relatively hassle free compared to other options. Often this money is used to develop the land or building to a specification that will then qualify for a commercial mortgage.
It also allows borrowers to use this type of lending to raise large amounts of cash, with many of our panel of lenders willing to lend upwards of £15,000,000 depending on your circumstances.
Hank Zarihs Associates are specialist and highly-experienced intermediaries in the commercial finance and investment funding industry. We work with a tried and tested panel of specialist commercial mortgage funders with an excellent track record in the market, who can offer high leverage and gearing.
With our knowledge and experience, we are able to present lending cases to our panel in a format which is most likely to increase your chances of being offered attractive commercial finance. By following a comprehensive due diligence process with each client we make it possible to find the right mortgage loan in the UK, quickly and efficiently – from the right lender.
We’re also proud to work with most of our clients on a repeat business basis – by proving the value of our service at every turn and by building long-term relationships with our developer clients. Whatever your level of experience, size of project or development loan need, you can be guaranteed of a superb experience with the team of friendly and helpful experts at Hank Zarihs Associates.
What’s more, we are able to add value at every step of the process, with in-depth knowledge and guidance, designed to help our clients match up with the right lender, for the ideal loan. We recognise that development loans are usually large and complex, so our service ensures that clients are best placed for acceptance from our lending panel.
We can save you money too, as we work with property development finance lenders who offer specific deals on bridging finance for intermediaries – meaning that our clients can access even more attractive deals on their borrowing – with our help, expertise and support at every step of the way.
Ready to apply for development finance UK? We work with a tried and trusted panel of development lenders who are actively lending. The deals that we can recommend to our clients are updated daily, so you have complete peace of mind that you are receiving details of the best possible development finance products on the market in real-time.
Our clients like to be able to see what they could potentially borrow with commercial finance or a bridging loan, and so we’ve put together a bridging finance calculator for you to give you a better idea of what you might qualify for.
If you’d like to use our quick lending calculator simply enter the type of property you’re looking to buy, followed by the property price and then the term of the loan.
If you want to use the manual version then you just need to enter all those details and, added to that, Loan To Value % (LTV), Rate %, Lender Fee % and the Exit Fee %.
There’s a few reasons that commercial bridging finance is popular with developers, especially as the market for this type of bridging loan has grown markedly recently. As we know from our clients and panel of lenders, what was once considered something of a niche product is now being used by more and more developers.
Relatively speaking this commercial lending is very reasonable in terms of interest with rates as low as as 0.43% per month, and this isn’t a fee that you usually have to service on a monthly basis.
This type of commercial bridging loan can usually be secured against a number of types of commercial property, although most frequently these bridging loans are secured against land, industrial estates or farm land.
You can also discuss with our brokers if there’s another type of security or asset that you’d like to be considered and they may be able to arrange to have this valued for you and give advice on whether it’s likely to be accepted.
For a commercial bridging loan most of our panel of lenders will usually treat each application on its individual merits and this means that it depends on your circumstances what sort of lending terms will be offered. Broadly speaking, it will depend on your deposit and track record but lending terms can vary from 1 to 24 months and interest is dependent.
Commercial bridging loan is a broad term and can encompass a number of projects, and can also be used for things like cashflow, purchasing property, renovation and restoration or business expansion.
We know from dealing with thousands of clients over the years that commercial development and property development more generally can be an unpredictable business and this means that, more often than not, investors need commercial lending as quickly possible. With this type of bridging loan on a property we can get you funding in as quickly as 72 hours.
Hank Zarihs Associates streamlines your financing journey with tailored solutions, fast approvals, and expert guidance, connecting you to trusted lenders for project success
Interest rates on this type of bridging loan can vary depending on a multitude of factors including the term of the commercial bridging loan, the deposit you have available and your track record of delivering on property development.
As we have many years worth of experience in the bridging loan industry we have built a number of exclusive relationships with lenders who know that we always deliver high quality applications that meet their standards. If you have a portfolio of completed works then this will hold you in good stead as our panel of lenders may ask to see your portfolio.
Ultimately, it will depend on your risk profile as to whether our panel fund your property or bridging loan. They will consider your proposal and what your exit strategy looks like for repaying the loan on time. If they think that your history and plan look good then it’s likely that they’ll agree to fund your property or bridging loan.
Investors often our experienced bridging loan brokers as they’re able to help them at length with their property projects and bridging loan applications. They’re able to help you find out what sort of interest rates you may qualify for depending on your circumstances.
Most people use these types of bridging loans to fund property projects, usually in a commercial capacity. The actual definition of that can be quite wide ranging and the money can be used to fund a multitude of things such as cashflow, purchasing property, renovation and restoration or business expansion.
In terms of security you’re likely to need a commercial property or other existing property to offer as an asset and security for the loan.
Once you’ve met the criteria for bridging loans, the lender will likely ask you for some kind of business plan or description of what you intend to use the money for. They’ll want to know, for example, whether you want to use the money for building materials, how much you intend to spend and on what. They’ll then want to know, for example, once you’ve used those building materials at what point your property will then be ready for a mortgage and, subsequently, repaying your bridging loan.
Again, however, our panel of lenders are experienced and take each case on its own individual merits so the best advice we can give at this point is to speak to a broker who can discuss this at further length with you. They’ve helped to fund millions of pounds worth of property projects over the years and they’re more than happy to go over the details of your application with you.
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
