What is a Bridging Finance?
Bridging finance or a Bridging Loan is a type of short-term loan that is used to ‘bridge’ a gap in funding for a short period of time.
How long is Bridging Finance taken out for?
The loan term for bridging finance is usually no longer than twelve months. Access to funds can be done with a matter of a couple of days making bridging finance a very fast and effective way of gaining funds.
What are interest rates on bridging?
Interest rates tend to be higher with bridging finance compared to that of a standard mortgage, however, lenders usually allow you to ‘roll up’ monthly interest payments and pay it alongside the capital owed at the end of the term.
How much can you borrow with bridging finance?
The minimum loan with bridging finance is usually £25,000 as anything lower than that than a personal loan may be more appropriate. There are no upper limits on how much you can borrow and depends entirely on your financial situation and the lenders discretion.
What fees are involved in Bridging finance?
There are two types of fees in bridging finance:
Entry Fees or Application fees: this is a fee the lender charges to use their bridging product.
Exit Fees: Not all lenders charge exit fees
There are also solicitor charges, broker fees and valuation costs which are the norm for any secured lending.
Why use Bridging Finance?
There many reasons applicants use bridging finance:
Fast access to funds- this usually takes place when applicants buy a property at auction and need to complete within 28 days or they would lose their initial deposit.
Traditional access to a mortgage is not available to you at the moment in time.
There is a retention on the property and the lender will not lend you the full amount so you need another source of access to funds
A previous source of funding has fallen through.
Types of Bridging Loans
There are a few types of bridging loans that are available, any bridging loan that is taken out will be subject to the following conditions:
Closed or Open Bridge
A closed bridge is a finance where you have a set date for repayment.
An open bridge is where there is an agreed exit strategy but no set repayment date.
First and Second charge Bridging loans:
First charge bridging loans are loans taken out against a property which does not have a mortgage secured against it. It is the first charge on that property.
Second Charge Bridging loans are for properties that already have a secured mortgage against the property.
A bridging loan can be both first and second charge if the loan is used against two properties ie: the first charge against a new property and a second charge against a property you already own. This is done to raise more funds from the lender.
Regulated and Unregulated Bridging Loans:
Bridging finance is usually regulated and both first and second charge loans are regulated if this is taken against a residential property. These loans age regulated by the financial conduct authority. However not all bridging loans are regulated. If you take out bridging finance against a Buy to Let Property it will not be regulated.
Loans may also be exempt from regulation if the lender considers the applicant as a high net worth individual.
What can a bridging loan be used for?
Bridging loans have a number uses both for private and commercial, however, they are most commonly used for property and development deals.
Typical uses for bridging loans Bridging loans are often used for:
• Residential property transactions
• Commercial property transactions
• Auction Finance
• Renovation projects
• Change of use developments e.g. office conversions, student accommodation
• New builds development projects.
Bridging loans offer fast and flexible access to money. This makes it possible to move forward quickly with investment opportunities.
When to use a bridging loan Bridging finance can help with a number of situations, including:
• quickly securing a property in the UK or abroad
• When a deal below you in a property chain falls through or if you intend to downsize to pay off an existing mortgage.
Converting un-mortgage able properties
• Buying a property at auction
• Property refurbishment for investment purpose
Whatever your needs our experts will compare the market and help you find the best Bridging Finance deal. We have access to over 1000 deals and our expert brokers will guide you to the best deal possible for you.
By choosing Rainstone Money our advisors will research the whole of the market and evaluate as to what is the best deal for you. Our Bridging team will look into both rate types and finance types available, so if you want a fast access to flexible funds you can be confident you will find the best deals with Rainstone Money.