Bridging loans or bridging finance are short-term interest-only loans commonly taken out by clients needing immediate access to funds for a property purchase. Bridging finance is ideal for those who might find themselves in a contract race, or needing auction property financing. And here at Enterprise, our bridging loans typically complete in just two weeks.
What is a Bridging Loan? [Video]
There are many reasons your client might consider bridging finance. Perhaps they need to complete quickly because they are buying a property at an auction. Or maybe they are purchasing a property to add value to it so they can sell it on (or arrange buy-to-let finance). The short-term nature of bridging loans also makes them ideal for those needing quick capital to cover a lease extension.
As demand for bridging finance has grown, products are becoming far more versatile than they were a few years ago. New product innovation means that the industry is flourishing. However, many of these loans are only available through a specialist bridging loan distributor like Enterprise.
More choice also means more time researching products. But Enterprise takes this headache away from intermediaries. The unique requirements of bridging loans also make the experience of a specialist provider crucial in finding the right product for your clients.
Bridging Finance: Main Features
- Can be used for purchase or re-mortgage as a first or second charge loan
- Can be secured on any property: houses, flats, commercial units, land with planning, uninhabitable and un-mortgageable properties
- Ideal for people looking to buy a property and add value to it before selling on or arranging buy-to-let finance
- No early repayment charge
- Interest can be rolled up so no monthly payments to make
- Ideal for leases extension
- Up to 75% LTV – 100% LTV available with additional security
- Peace of mind that your clients’ cases are being dealt with by the industry’s leading professionals.
- Ideal for rescuing broken property chains
- Ideal for financing uninhabitable property
Bridging Loan FAQs
What is a bridging loan?
A bridging loan is a short-term interest-only loan available to those that need immediate access to capital for a property purchase. In short, it is a loan to ‘bridge’ the gap while other finance is secured by the borrower. Bridging loans are secured, meaning the borrower uses other property or land as security to the lending institution.
Who can apply?
An individual or a limited company can apply for a bridging finance.
Who might use a bridging loan?
Bridging loans are mainly used by clients that need quick, short-term capital to fund a property purchase. They include those who:
- Need to complete quickly. This might include property developers, who often have the opportunity to secure a great deal if they can complete quickly.
- Buy through a property auction. Bridging finance are popular with those buying property at an auction. Here, completion has to take place within 28 days which means traditional financing is not usually an option.
- Are in a broken property chain. A bridging loan enables a seller of one property to secure their new property before the sale of their existing property goes through.
- Want to buy an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). A bridging lender will base its lending on the property’s value in its current condition, however. This means the buyer can get access to the property and work on it to make it habitable.
- Are renovating or developing a current property. A property investor may want to renovate a property within a few months and either sell it on or refinance. A bridging loan can often be the perfect vehicle for this short-term capital requirement.
- Have to get planning permission. In order to obtain planning permission and secure development funding, the developer may need immediate access to capital.
- Need a lease extension. When a property has a short lease a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.
Which types of property can a bridging loan be used for?
Your client can borrow for residential, semi-commercial and commercial properties and land, regardless of the construction, type or use.
How much can my client borrow?
Typically, the minimum amount for a bridging loan is £26,000. The maximum is subject to LTV and property value. We have vast experience in multi-million pound loans.
How long can my client borrow using a bridging loan?
A bridging loan can be taken out from one day up to one year.
What interest will my client pay?
This depends on the borrowing circumstances. However, interest range between 0.55% to 1.5% for each month of the loan, and the borrowing is done on an interest-only basis.
When will my client find out if their application has been successful?
Our experience means that in most cases we will be able to confirm almost straight away whether your client’s application is likely to be successful.
How long will an application take to complete?
From the initial enquiry to completion, our average turnaround time is three weeks for a second charge mortgage, two weeks for bridging loans and six to eight weeks for both commercial mortgages and complex buy-to-lets.
Can my client repay their bridging loan early?
Yes. And without penalty in most cases.
What is an exit route?
As bridging loans are for the short-term, each client must have a plan in place to pay off the loan. This is known as an ‘exit route’. A viable exit route is a must on all bridging loan applications.
What commission do Enterprise pay to intermediaries on a bridging loan?
Commission on bridging finance typically is 1% of the loan amount. (There is a minimum payment of £1000.)