Unfortunately, without a full review of your specific circumstances it is very difficult to say how much you can borrow. The amount of finance is based on the type and value of the property used as security. Generally, you can borrow up to 70% of the value of the property used as security when taking out a regulated bridging loan, or up to 80% for unregulated bridging loans. These are based on the gross loan amount and not the net amount, as this could be around 5 or 10% less.
There is the ability to borrow 100% of the property value when additional security is used, for example if you required 100% of the value, and got 70% from the initial property in question, as additional security you could use another property to secure the full amount needed as this is less risky to a lender.
As with any finance agreement, the lenders have stipulated a payment timeframe and would expect this to be paid within the agreed term. Due to the nature of bridging finance, the main focus is set on how the loan is due to be repaid, if this proposed plan doesn’t seem viable then generally the finance will not go ahead.
The main exit methods which lenders find feasible are refinancing or the sale of the property. The refinancing route will generally prompt some due diligence prior to the lender agreeing to the loan, to ensure they are happy that this option is a possibility. The sale route will also generally come with some stipulations, with many lenders requiring the property to be on the market before or shortly after the start of the loan or following necessary building works with a set timescale.
Due to the nature of the property market, not everything goes according to plan, so a few months before the end of the finance agreement lenders usually make contact for an update on whether the exit route is working out as planned. Many lenders will work alongside borrowers whose exit route doesn’t look likely to occur within the agreed timeframe, and often offer suggestions to help get it back on track. If this still doesn’t help with meeting the repayment terms, depending on the circumstances, many lenders will usually work with the borrowers as long as they have a plan and keep them updated regularly.
In the worst case scenario, the lender can repossess the property used for security which could massively impact your credit history as well as ending up with a substantial financial loss.
Timescales for obtaining finance can vary depending on the circumstances relating to the finance. However, general guidelines for timescales are as follows:
1 – 2 days to be offered a Decision in Principle
1 – 2 weeks for a formal offer to be obtained
2 – 4 weeks for the application to complete and for the funds to be available
Bridging loans are designed to be short term finance, usually between 1 – 12 months on lengths, however some lenders can offer up to 36 months. Regulated bridging loans have maximum term length of 12 months.
With access to a variety of lenders we’re able to obtain competitive rates on bridging finance. Rates are dependent on a variety of factors such as the property or development loans used for security, how much you are wanting to borrow and the LTV.
Most lenders do not charge a fee for early repayment on your loan and if you choose to repay before the agreed end date, you will only pay for the interest during the length of time you have actually borrowed the money rather than the full initially agreed term. If any additional charges or penalties apply, these will be explained before taking out the loan.
Credit issues shouldn’t affect your ability out take out bridging finance, as the basis of the loan relies heavily on the security of the property and proposed exit plan. Issues with credit, however, are likely to affect the ability to use refinancing as the exit route, so the property sale would be the most viable option.
Some lenders will accept an equitable charge to secure the financing of a bridging loan. An equitable charge doesn’t need permission from the first charge lender before being added to the land registry documentation.
A lot of lenders will request some proof of income during the application, however as the fees and interest on bridging finance is generally rolled into the final sum, there are no monthly payments, which usually removes the requirement to show that income can afford the loan.
Yes, even though it was originally designed for and commonly used in property transactions, bridging finance can actually help in a variety of situations such as probate and inheritance tax issues, cash flow problems within a business and paying tax liabilities.
Properties or plots of land can be used to secure your bridging loan, with many lenders being flexible on the type. For example, the property could be a residential or commercial one, it could be in need of renovation or be a plot of land with or without planning permission, our lenders will assess each application individually. Contact The Bridging Loan Company for advice.
Due to the large number of lenders we have access to, we are generally able to find a solution taking into account any credit issues.
Yes, we are able to arrange commercial bridging loans, as long as your business can provide sufficient security to cover the finance amount.
If you have enough equity in a mortgaged property it can be used as security for bridging finance. To determine this, you need to deduct the mortgage balance left outstanding from the current market value.
Lenders generally require a valuation report so this would need to be paid for prior to the finance being accepted.
There can sometimes be an arrangement fee on bridging finance, this itself is not required as an upfront payment but will generally be rolled into the final payment amount. The other additional costs to consider are for interest, the total amount of interest will be based on the interest rate and length of the agreement. Development loans are usually rolled up until the end of the term.
As long as there is sufficient security left in the property or an additional property and you’re not in default then this should be possible.
Yes, capital reductions can be made during your term. These can help reduce the interest charges as these are calculated monthly, and also lower the balance outstanding on the loan.
Closed bridging loans are your typical bridging finance which has a clearly defined exit route, such as sale or refinancing. These usually have a high rate of approval and are the most common type of bringing finance.
On the other hand, an open bridging loan doesn’t require an exit route to be set out. Due to this, they are more unpredictable and therefore more difficult to arrange. With open bridging loans being riskier, lenders will generally only look at this option if your security for the loan is sufficiently high.
This is a specialist type of financing specifically aimed towards developers in need of extra funds to complete a current project. Generally, a developer will have taken out a bridging loan who will provide the majority of the funds needed, and then the mezzanine finance will cover any shortfalls or extra requirements, with this usually being done as second charge finance.
Both finance types are similar in nature, as they are both short-term solutions and are secured against properties or land. However bridging finance is released as a whole lump sum at the beginning of the term, whereas development finance is generally released in small portions throughout the term.
Additionally, with development finance the asset is undergoing works throughout the term, which in turn increases the value meaning additional security is provided. This can then be used to secure additional funding required to develop a project further. If you require further information on what is a bridging loan view our blog which may help.