Bridging Finance
Bridging Finance
Bridging Finance Service
When time is of the essence, bridging finance offers a fast and flexible short-term loan solution. Whether you're securing a property, funding renovations, or bridging a financial gap, a bridging loan can provide the financial support you need while you arrange a longer-term plan.
What Can You Use Bridging Finance For?
Bridging finance is commonly used in property transactions, making it ideal for both residential buyers and property investors. Key uses include:
This type of finance allows you to act quickly and provides the time you need to arrange a long-term financial solution or complete a property sale.
- Securing a property quickly, especially when buying at auction
- Purchasing your dream home before selling your current property
- Funding property renovations before refinancing or selling
How Much Can You Borrow and What Does It Cost?
Borrowing amounts for bridging loans generally start from £75,000, with no upper limit, depending on the lender and your circumstances. The cost of a bridging loan depends on the loan amount and terms, with interest typically structured as rolled-up:
This structure removes the need for monthly repayments, allowing you to focus on your project or purchase without worrying about immediate cash flow.
Bridging the Gap
A bridging loan is a practical solution for short-term financial needs. For example:
- Property Renovation Secure funding to renovate and sell a property, with the loan cleared from the sale proceeds.
- Auction Purchases Act quickly to buy a property at auction and settle the loan once long-term financing is arranged.
Open and Closed Bridges
Bridging facilities divide into two kinds, and the distinction drives both the price and whether a lender will offer at all.
A closed bridge has a fixed repayment date backed by something already certain — most often an exchanged contract on a sale, with completion scheduled. The lender knows when the money is coming back, so a closed bridge is the cheaper and easier of the two to arrange.
An open bridge has an intended exit but no fixed date. A property is going on the market, or a remortgage is expected but not yet offered. Lenders will fund these, but at a higher rate and usually at lower leverage, because the risk of the facility running to term sits with them.
Most borrowers approach a bridge as open and could have made it closed by waiting a short while for one document. It is worth asking the question before you apply, because the saving can be considerable.
First and Second Charge Bridging
A bridge does not always require an unencumbered property.
First charge is the standard arrangement, with the bridging lender holding the primary security. Second charge sits behind an existing mortgage, allowing you to raise short-term funds against equity without disturbing a facility you would rather keep — a low fixed rate, for instance, or a product with a substantial early repayment charge.
Second charge bridging is priced higher and requires the first lender's consent, which is not automatic and can take longer to obtain than the bridge itself.
Security can also be spread across more than one property. Where a single asset does not provide enough equity, lenders will often take charges over several, which is common among landlords raising a deposit against an existing portfolio.
How the Property Is Valued
Bridging valuations are not read the way mortgage valuations are, and this surprises borrowers more than any other part of the process.
A lender will normally instruct a valuation reporting both market value and a restricted marketing period value — what the property would realise in a forced sale, typically assessed over 90 or 180 days. Leverage is frequently calculated against the lower figure rather than the headline one.
The practical effect is that a facility quoted at a given percentage may advance materially less than expected. Where a property is unusual, part-built, or hard to sell quickly, the gap between the two figures widens.
Ask early which basis the lender is using. A borrower who has planned around market value and is then offered a lower advance late in the process may be unable to complete at all.
What Actually Determines Speed
Bridging is sold on speed, and the delays are rarely caused by the lender.
Underwriting is quick because the decision rests on the security and the exit rather than on income. What holds cases up is almost always legal: absent title documents, unregistered land, a lease with defects, an unresolved right of way, or a solicitor without recent bridging experience.
Two things shorten a case more than anything else. Instruct a solicitor who does this work regularly, and assemble identification, proof of funds for your contribution, and the title documents before an offer is issued rather than after.
A well-prepared case can complete in a couple of weeks. A poorly prepared one takes as long as an ordinary purchase, at bridging rates throughout.
With the flexibility and speed of bridging finance, you can achieve your property goals without unnecessary delays.
What Are the Risks?
While bridging loans are invaluable for short-term financial needs, they come with risks. You must be confident in your ability to repay the loan at the end of the agreed term. Failure to repay may result in financial penalties or, if secured against property, the loss of assets.
If you're considering a move, you might also be interested in exploring loans for moving house, which can help you decide the best financing option for your needs. Our team will guide you through the terms of any loan you consider and ensure you fully understand the responsibilities before proceeding.
At Bradgate FS we aim to make choosing and applying for a mortgage, protection, loan or insurance as stress-free as possible.
We specialize in helping clients secure bridging finance tailored to their unique needs. Our experienced team works with a wide range of lenders to find competitive rates and ensure a seamless borrowing process.
Related
Important information
Some bridging loans are not regulated by the Financial Conduct Authority.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR LOAN.
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