Do you need Bridging Finance, or short term mortgage loan?
If you need short term or fast property finance, we can help:
About Bridging Finance
Bridging loans are versatile short term loans that can be used for a number of finance requirements such as investing in business opportunities, buying a property at auction, property conversions and renovations and seizing investment opportunities.
The traditional use of bridging is when it acts as a metaphorical bridge between selling one house and buying another. It is relevant when a buyer wants to buy a new home before they have completed the sale on their current property.
A bridge may also be used to raise funds from a property that is on the market for sale, for immediate use and to be repaid when the property is sold.
Investors looking to purchase properties not currently in a habitable condition, will struggle to get mortgages from mainstream lenders. Bridging can be used to buy the property and complete the necessary renovations before moving to a standard mortgage. It is important to consider how long the refurbishment will take and which lender you can refinance to.
Medium Bridge (Or short term mortgage)
Medium term bridge style loans for up to 5 years are now available. They tend to be priced slightly cheaper than standard bridging, but are more expensive than mainstream loans. They are used to provide time for the owner to make any arrangements they need with their finance or property to enable them to meet the mainstream lenders criteria. One example is a start up business without any accounts history, wanting to purchase their own business premises. The medium bridge lender will provide a loan for the purchase of the premises and once the business has been trading for 3 years, they will then meet the qualifying criteria to refinance to a mainstream commercial lender.
Bridging can be appropriate for individuals who have a huge cost that needs paying immediately such as an unexpected VAT or Tax bill. These individuals tend to be asset rich but cash poor in the short term. It is important to have a viable repayment solution in the coming months such as a property sale.
Loan to Value Bridge
Where a property such as a repossession or auction property is being purchased at a price below that which could normally be achieved in the open market, some bridge lenders will consider lending on the value of the property rather than the purchase price and thus increasing the loan size that may otherwise have been available.
Planning your bridge exit route
Whilst bridging represents an effective solution in many cases, it should normally only be seen as a short term lending product and is priced accordingly. It is therefore very important to consider how the bridge will be repaid and how quickly you can repay it. This is often referred to as the ‘exit route’
A typical exit route will be a refinance to a mainstream lender, although it is worth noting that many lenders, including most Buy-to-Let lenders in particular, will not allow you to refinance to them until you have owned the property for at least 6 months.
If you require to refinance the bridge to a mainstream lender sooner than 6 months, Connect can guide you towards lenders who may consider this under certain circumstances, for example following refurbishment.
Before proceeding with a bridge, Connect will take time to evaluate all your exit options and the adviser will only recommend proceeding if they can clearly establish at least 3 options for the repayment of the bridge at the end of the bridge term.