Marcus Fitzpatrick

Marcus Fitzpatrick

How Does a Bridging Loan Work?

Contrary to popular belief, a bridging loan has the potential to be a surprisingly simple and versatile funding solution. No longer confined to commercial borrowing circles or big business, bridging finance has well and truly hit the mainstream as of late.

But how exactly does bridge finance work in practice? More importantly, who can qualify for bridging loans, and when is taking out bridging finance a good option to consider?

How bridging loans work

The best way to understand how bridging loans work is to consider a couple of everyday scenarios:

Scenario 1. Bridging loans for property chain breaks

  • A homeowner with £500,000 equity in their home applies for a bridging loan of £300,000
  • The loan is secured against their current home and the funds are released within a week
  • This enables the borrower to purchase their next home (on sale at £300,000) for cash
  • Their previous home remains on the market until it sells for its best possible price
  • When their previous home sells a few months later, they repay the loan in full
  • Interest accrues at a rate of around 0.5% in the meantime and is repaid along with the loan balance
  • By taking out a bridging loan, the borrower was able to avoid the risk of their planned property purchase falling through

Scenario 2. Bridging loans for property purchase, renovation and sale

  • A property in a poor state of repair is put on sale at auction for much lower than its potential market value
  • An investor places a bid on the property and is successful, but must come up with the full payment within 28 days
  • They take out a bridging loan against their own home or another property they own, accessing the funds promptly
  • The loan is used to purchase the property and cover the costs of all subsequent renovations
  • A few weeks or months later, the property is sold for its full market value to a new buyer
  • The investor then repays the loan in full and retains all additional profits

In both instances, the borrower benefits from rapid access to a significant sum of money, enabling them to make a purchase that would be impossible with most conventional borrowing products.

Who is eligible for bridging finance?

Along with the flexibility and affordability of the facility, accessibility is another major point of appeal with bridging finance. Eligibility criteria are comparatively relaxed, at least when held alongside a typical mortgage or personal loan application.

The main requirement is ownership of assets of value to offer as security for the loan. For example, if you own a home with a value of £500,000, you may be able to borrow up to 80% of this value (at 80% LTV), which would be £400,000. Without adequate security, you cannot take out bridging finance.

Other than this, you will need to present your lender with evidence of a workable exit strategy, for example, how and when you plan to repay the loan. For example, if you are buying a property to renovate and sell, your exit strategy would be the subsequent sale of the property.

With viable security and a convincing exit strategy, you have a high chance of qualifying for bridging finance. Even if you have imperfect credit and/or no formal proof of income, you may still be considered for a bridging loan.

However, in all instances, it is advisable to apply via an independent broker, who can help pair your requirements with an appropriate lender. The UK’s network of bridging loan specialists is growing at its fastest pace, making the input and advice of a skilled broker more valuable than ever before.

For more information on any of the above or to discuss the pros and cons of bridging loans in more detail, contact the team at UK Property Finance anytime.

Are Bridging Loans a Good Idea?

At the risk of jumping straight to the conclusion, no financial product is an effective one-size-fits-all solution. The whole thing is highly circumstantial, based entirely on your requirements at the time, coupled with what you can comfortably afford.

Bridging finance is no different, which in some instances can be no less than a godsend. One of the most commonly misunderstood financial products to have hit the mainstream market as of late, bridging finance has the potential to be uniquely versatile, accessible, and even affordable.

Again, in the right instances and when taken out under the right circumstances.

How do bridging loans work?

Perhaps the simplest way to think about a bridging loan is as something like a very short-term mortgage. Bridging finance is issued in the form of a secured loan, typically against a home or commercial property. The amount you can borrow is therefore tied to the value of this security, typically up to a maximum LTV of 80%.

So, if you have built up £250,000 of equity in your home, you could borrow up to £200,000.

The key difference is that with a bridging loan, the funds can often be accessed within a few working days. After which, the loan is repaid in full no more than a few months later, in a single lump-sum payment plus borrowing costs.

Monthly interest can be as low as 0.5%, adding up to a very competitive form of borrowing when repaid promptly.

When is a bridging loan useful?

There are countless scenarios where this kind of fast-access, short-term cash injection could be hugely valuable.

Typical applications for bringing in finance include the following:

  • Refurbishments: A short-term loan can be just the thing to cover the costs of renovations or repairs, prior to selling or letting out a property to maximise its value.
  • Chain Break: Homebuyers can use bridging finance to ‘bridge’ the gap between buying their next home and selling their current home, avoiding potential chain break scenarios.
  • Property Development: Construction companies and developers often turn to bridge finance to cover their short-term funding requirements while conducting projects.
  • Auction Purchases: Bridging finance provides an affordable way to meet the 28-day payment requirements of auction houses when purchasing properties.
  • Inheritance Tax (IHT): If you need to pay a large IHT bill in order to gain access to your inheritance, you could take out a bridging loan and repay it when you receive your money.

In short, anytime you need a sizeable cash injection in a hurry and can comfortably repay the loan within a few months at the most, bridging finance could be just the thing.

What are the benefits of bridging loans?

Bridging finance holds four main points of appeal when compared to the vast majority of mainstream loans and funding solutions:

  • Fast: If you submit a strong application complete with all required evidence and documentation, the money you need could be in your hands within 3 days.
  • Flexible: There are no limitations placed on how you can allocate the funds you receive, as is often the case with other types of loans.
  • Accessible: It’s possible to qualify for bridging finance with no formal proof of income and even a poor credit history.
  • Affordable: Charged at as little as 0.5% per month, a promptly repaid bridging loan can be a surprisingly cost-effective option.

Just as long as you have sufficient assets of value to offer as security and a viable exit strategy, you have a good chance of qualifying for a bridging loan.

When is bridging finance not a good idea?

As with all secured loans, risks apply when taking out bridging finance. If you are unable to repay your loan as agreed, your asset (i.e., your home or business property) could be repossessed.

In addition, bridging finance is only affordable when repaid promptly; therefore, it should never be taken out as a longer-term solution. If you have the slightest doubt as to your capacity to repay the loan in full and on time, you should not even consider applying for bridging finance.

For more information on any of the above or to discuss the pros and cons of bridging loans in more detail, contact the team at UK Property Finance anytime.

What Are Probate Bridging Loans?

Being a named beneficiary of a deceased person’s estate often brings unexpected obstacles and financial burdens. One of which could be your obligation to pay inheritance tax (IHT), which, depending on the size of your inherited estate, could amount to a major headache.

With the current IHT threshold in the UK standing at £325,000, IHT bills can often amount to sums that are simply insurmountable. Beyond this threshold, you will need to pay an IHT of 40% of the combined value of all assets you will eventually take ownership of.

To gain legal access to your inheritance, you may have to look for ways to finance these bills with third-party support. This is where probate bridging loans can come into play as an accessible, affordable, and convenient option.

Understanding probate bridging loans

Probate bridging loans, one of many types of specialist inheritance loans, are a type of short-term loan that beneficiaries can use to pay off IHT and other related expenses, such as probate costs and legal fees.

As the name suggests, they are designed to ‘bridge’ the financial gap between the time the inheritance is announced and when it is actually received, which can often be a lengthy process. Sometimes several months or even years.

The benefits of probate bridging loans

There are several unique features and benefits that have made probate bridging loans an increasingly attractive option for beneficiaries as of late:

  • Fast Funds: Unlike regular mortgage loans that might take extended periods for approval and disbursement, probate bridging loans can be arranged in a few working days. This is particularly helpful when beneficiaries need to meet urgent tax obligations.
  • Flexible Loan Size: Probate bridging loans have no maximum loan size, meaning the amount you borrow is tailored to your unique needs and is usually based on the value of the inherited property.
  • Competitive Rates: Interest rates for these loans can start as low as 0.5% per month, making the borrowing costs much lower compared to long-term loans.
  • Poor-Credit Applicants Welcome: Bridging loans do not discriminate against poor-credit applicants and often do not require proof of income. This opens the door for many beneficiaries who might otherwise struggle to qualify for a loan.
  • Early Repayments: Most bridging loan lenders will offer the option to repay the loan early without incurring penalties, providing yet another benefit for beneficiaries.

Contact UK Property Finance

At UK Property Finance, we provide access to a broad range of specialist funding solutions for heirs and beneficiaries faced with an impossibly high inheritance tax bill. With our help and support, negotiating during one of life’s toughest times can be made much less daunting, with the representation and objective advice you need to make the right decisions.

For more information on any of the above or to discuss your requirements in more detail, call or email the UK Property Finance team anytime.

Understanding Your Options for Buy-to-Let Mortgage Products

The preferred choice of many looking to increase their monetary value over time, recent years have seen a growing boom within the buy-to-let market. These mortgage products give opportunities to property investors who want to secure properties to be rented out for income. You must completely understand the various types of products available before looking at securing this kind of mortgage loan. Let us explore the various options below:

Fixed-rate mortgages

Due to their stability and predictability, a fixed-rate product is often a loan type that is commonly used and wanted by BTL investors. Financing via this type of mortgage means that your given interest rate remains unchanged for a fixed period of time; normally, this tends to be between two and five years, which will be agreed upon with your lender or bank. With fixed-rate products, the key benefit that stands out is that they protect you from hazardous and expensive interest rate fluctuations, thus allowing you to budget your finances more accordingly, knowing exactly what you have to play with after your payments. Please be considerate that fixed-rate mortgages do normally have a higher interest rate when compared to other options.

Tracker mortgages

Sometimes referred to as variable-rate mortgages, a tracker mortgage is directly linked to the specific base rate set by the Bank of England. The rate on these mortgages fluctuates in line with amendments to the base rate itself. To explain: if the base rate increases by 0.25%, your mortgage rate will also increase by the same percentage figure. Likewise, if the base rate decreases by, say, 0.25%, then your repayment rate will decrease as well to reflect that change in the base rate. Tracker mortgages can offer attractive rates initially, but they carry an element of uncertainty due to potential interest rate hikes.

Discounted rate mortgages

Discounted rate mortgages provide borrowers with a reduction on the lender’s standard variable rate (SVR) for a specific period, typically between two and three years. These mortgages offer a discount, often expressed as a percentage below the SVR. While discounted rates may seem appealing, it’s important to consider the lender’s SVR as well, as it can vary significantly. This means that while the discounted rate may be low, the SVR itself might be higher compared to other lenders, impacting the overall cost.

Offset mortgages

An offset product allows you, as the borrower, to link both or just one of your savings and current accounts to your mortgage; this then ‘offsets’ the interest charged on the mortgage balance. If you happen to have a mortgage with a balance to repay of £200,000, you hold savings of £50,000, which you link to it; this means you will only pay interest on the net balance (in this example, that would be an amount of £150,000). Offset mortgages can be a tax-efficient option, as the interest earned on your savings is not subject to tax. However, they often come with higher interest rates and fees.

Interest-only mortgages

With this type of loan, borrowers are only asked to pay interest on the loan each month, with the principal amount remaining unchanged, i.e., the outstanding mortgage balance itself. When your mortgage term has ended, you must, at that time, repay the entire loan amount in full. As your payment is significantly lower each month, this can prove very attractive, particularly for investors or those who do not want to immediately compromise their cash flows. Be sure that you have a plan in mind for clearing the balance at the end of the loan term.

Assess all your financial circumstances, risk tolerance, and investment objectives before even considering if this is the right kind of loan. Each of the aforementioned products has its own set of advantages and disadvantages. A specialist whole-of-market broker like UK Property Finance can provide invaluable guidance tailored to your specific needs.

To sum up, there are many types of buy-to-let mortgages open to you, and it is crucial that, prior to getting into the property investment market, you understand these and what your actual options are. Our advice at UK Property Finance is to carefully consider your options and seek advice when needed. With the right guidance, there is no reason why this venture should not be the foundation of your future success and growth.

What Are the Alternatives To Bridging Loans?

Bridging loans have really come into their own as of late, acknowledged and accepted by mainstream borrowers as a useful alternative to more conventional products. In the right hands and for the right purpose, bridging finance has the potential to be uniquely flexible, versatile, and affordable.

Even so, there will always be instances where a bridging loan is not necessarily the best option available. Either due to the nature of your requirements or issues with eligibility, your broker may advise you to consider the alternative options available.

The below options could prove more appropriate and cost-effective.

Here are just a few alternatives to consider when bridging is not the best option:

A mortgage extension

If you are in good standing with your current mortgage provider, you have a good chance of qualifying for a mortgage extension. This is simply where you increase the size of your mortgage to cover your requirements, in return for extending the term of your mortgage or increasing your monthly repayment.

Secured loans

There’s an extensive range of secured loan options available on the mainstream and specialist markets, both for business purposes and for private borrowers. Lenders implement their own policies with regard to the types of assets they are willing to accept as security, which could be anything from the home you live into jewellery, watches, cars, business equipment, and so on. Secured loans tend to be longer-term in nature and repaid over the course of several years.

Unsecured loan

If you require a fairly modest capital injection, an unsecured loan can be a good option. Some secured loan applications can be processed within 24 hours, typically with maximum loan sizes of around £15,000 to £20,000 available. Repayment terms are flexible (usually a few years), and interest rates can be highly competitive.

Property development finance

In the commercial arena, specialist property development finance can be a fantastic facility for established developers and construction companies. With development finance, there are no upper limits placed on how much can be borrowed, based on the value of the project being undertaken and the security provided by the applicant.

Refurbishment loans

Open to both mainstream applicants and commercial borrowers, a refurbishment loan provides the funding needed to perform minor or major property renovations before selling or letting it out. It is effectively a specialist type of bridging loan, but it is issued exclusively for property refurbishment and renovation purposes.

Commercial mortgages

Where time is less of a pressing factor, a commercial mortgage could be used in place of a bridging loan. Commercial mortgages work similarly to conventional mortgages, though they are issued exclusively for the purchase of business properties and have much higher minimum deposit requirements (often as much as 30% to 40%). As it can take several weeks (or even months) to arrange a commercial mortgage, it is not a viable option in time-critical scenarios.

At UK Property Finance, our experienced brokers can provide you with the objective advice you need to decide which product is right for you. From bridging loans to development finance to all types of specialist business loans, we’ll scour the market to help you secure an unbeatable deal from a top-rated lender.

Call anytime for a free consultation or email us, and we’ll get back to you as promptly as possible.

Unlocking the Secrets to Securing the Ultimate Mortgage Rate

If you are embarking on the interesting journey of purchasing your first property, it’s vital to approach it with a keen eye on the long-term financial implications. Getting an excellent, viable loan fee is an essential factor that can considerably affect your cash balance and capability for future refinancing opportunities. In this piece, we aim to discover a few insider pointers and hints that will help you unearth the best mortgage deal.

Thorough research and comparison 

Your first step towards finding the ultimate mortgage rate is to conduct comprehensive research to gain a deep understanding of the current mortgage market. Dive into reputable financial websites, consult mortgage brokers, and explore loan comparison platforms to gather valuable information about interest rates, terms, and conditions offered by a variety of lenders. Take note of offerings from both traditional banks and specialised mortgage lenders to develop a comprehensive overview.

Evaluating your financial situation 

Before approaching lenders, it’s crucial to conduct an honest evaluation of your financial circumstances. Calculate your income, savings, and existing debts to determine the borrowing capacity that aligns with your comfort level. Lenders scrutinise factors such as your credit score, employment history, and debt-to-income ratio when establishing the interest rate they will offer you. By working on improving these aspects, you can significantly enhance your chances of securing a more favourable mortgage rate.

The credit score game 

Your credit score plays a paramount role in determining the mortgage rate you’re eligible for. Obtain a copy of your credit report from credit reference agencies and meticulously review it for accuracy. Should you identify any errors, promptly notify the relevant agencies to rectify them. Additionally, paying bills on time, reducing credit card balances, and avoiding new debts in the months leading up to your mortgage application can work wonders in boosting your credit score and increasing your chances of securing a competitive mortgage rate.

Pre-approval advantage 

Submit a mortgage application to a lender, who will review your financial situation and give you pre-approval. Armed with this letter, you showcase yourself as a serious buyer to sellers and can confidently narrow down your property search to homes within your predetermined budget.

Understanding mortgage types 

Familiarise and educate yourself with the many types of mortgages on the market. Each comes with its own pros and cons, and by having a thorough understanding of these options, you can choose a mortgage that better suits your long-term financial goals.

Negotiation skills unleashed

Once you have armed yourself with adequate information and zeroed in on the mortgage type that suits you, it’s time to embark on the negotiation journey. Reach out to multiple lenders and provide them with your financial details. Compare the interest rates, terms, and closing costs offered by each lender. Armed with this knowledge, you can skillfully negotiate better rates or even request lenders to match or surpass the offers provided by their competitors.

Seek expert counsel

Brokers have a wide variety of lenders who can help you find a mortgage that fits your pocket. They can also handle all paperwork and negotiate on your behalf, saving you valuable time and effort.

Securing the ultimate mortgage rate necessitates unwavering dedication to thorough research, astute financial assessment, and effective negotiation skills. By investing time and effort in exploring the market, evaluating your financial standing, and meticulously comparing offers from various lenders, you exponentially increase your chances of securing a mortgage with terms and an interest rate that aligns with your dreams. Always bear in mind that uncovering the best mortgage rate can potentially save you substantial sums over the lifespan of your loan, making this endeavour a truly worthwhile pursuit.

UK Property Finance: A Guide to Mortgages for Investment Properties

Investing in property can be a lucrative venture, offering the potential for both rental income and even long-term capital growth. As a seasoned investor or a first-time buyer, understanding the financing of an investment property is crucial. The world of mortgages for investment properties is confusing. Let UK Property Finance help you navigate this complex landscape.

Choosing the right mortgage:

When it comes to financing an investment property, selecting the right mortgage is vital. UK Property Finance provides a range of mortgage options tailored specifically for investment properties. Mortgage products for investment differ from residential ones as they take into account rental income yields, type of property, and investment exit. With UK Property Finance, you can access a diverse selection of mortgage products designed to meet your unique requirements.

Buy-to-let mortgages:

The buy-to-let method enables you to purchase your desired property with the intention of renting it out to generate an immediate return through rental income. Longer term, you may benefit from property value appreciation too. UK Property Finance understands the complexities of the buy-to-let market and can provide expert guidance to help you secure the most suitable mortgage.

Specialist mortgages:

UK Property Finance specialises in offering mortgages for various investment property types, including houses in multiple occupations, multi-unit properties, and commercial properties. These specialist mortgages are tailored to the unique requirements of each property type, taking into account factors such as licencing regulations, rental yields, and property usage. With UK Property Finance, you can access the expertise needed to navigate the intricacies of specialist investment properties and secure the right mortgage for your needs.

Competitive rates and flexible terms:

UK Property Finance understands the importance of competitive rates and flexible terms, and as such, we work with a wide network of lenders to offer you access to a range of mortgage options: Our aim is to find you a mortgage solution that aligns with your financial goals.

Expert advice and support:

Navigating the mortgage market can be overwhelming, especially when it comes to investment properties. That’s where UK property finance excels. At UK Property Finance, our advisers all understand the complexities of investment property financing and can guide you through the process from start to finish.

Streamlined application process:

We make it efficient and hassle-free to secure a mortgage for your investment property. Simply speak to a member of our dedicated mortgage team to get the ball rolling and alleviate unnecessary delays.

In conclusion, securing a mortgage for an investment property is a crucial step in your property investment journey. Whether you’re considering a buy-to-let property, a specialist investment, or a commercial building, UK Property Finance is your trusted partner.

Countries we can support Expats

The success of your UK mortgage application as a UK expat depends heavily on your country of residence, as it impacts which lenders will consider your application and the interest rates and fees you will face. High-street banks with international arms may provide options for those living abroad, but each lender’s criteria will differ.

Navigating the process of securing an expat mortgage can be simplified with the guidance of an experienced mortgage broker. However, expat status can present additional administrative issues for lenders, particularly if your earnings are paid in foreign currency. Income from overseas is challenging for lenders to verify, increasing the risk of money laundering, which results in expat mortgages being costly and difficult to obtain.

Although many lenders are geared up to handle expats, the availability of options can vary by country. Countries with high risks or are less typically seen by lenders may have fewer options available.

If you reside within a country that is not listed on the FATF List, Financial Action Task Force, it may be more difficult to have your application for lending approved. Countries that are on the list of the FATF can be found here.

To obtain additional details on how to apply for a mortgage in the UK from a different country and how our expert expat broker team can assist, please choose your location from the list below:

Europe

  • Austria
  • Denmark
  • France
  • Germany
  • Guernsey
  • Iceland
  • Italy
  • Ireland
  • Isle of Man
  • Jersey
  • Netherlands
  • Spain
  • Sweden
  • Switzerland
  • Turkey

America

  • Canada
  • USA
  • Mexico
  • Caribbean

Asia

  • Abu Dhabi
  • Dubai
  • Hong Kong
  • India
  • Japan
  • Singapore
  • Thailand

Australasia

  • Australia
  • New Zealand

Africa

  • South Africa

Discover the top UK mortgage deals for expats with UK Property Finance, a fully regulated mortgage broker based in the UK.

We have established relationships with the majority of the major UK mortgage lenders who specialise in expat mortgages. These relationships will allow us to identify and provide you with the best deals and mortgage rates on the market.

Countries we can support Expats

The success of your UK mortgage application as a UK expat depends heavily on your country of residence, as it impacts which lenders will consider your application and the interest rates and fees you will face. High-street banks with international arms may provide options for those living abroad, but each lender’s criteria will differ.

Navigating the process of securing an expat mortgage can be simplified with the guidance of an experienced mortgage broker. However, expat status can present additional administrative issues for lenders, particularly if your earnings are paid in foreign currency. Income from overseas is challenging for lenders to verify, increasing the risk of money laundering, which results in expat mortgages being costly and difficult to obtain.

Although many lenders are geared up to handle expats, the availability of options can vary by country. Countries with high risks or that are less typically seen by lenders may have fewer options available.

If you reside in a country that is not listed on the FATF List or the Financial Action Task Force, it may be more difficult to have your application for lending approved. Countries that are on the FATF list can be found here.

To obtain additional details on how to apply for a mortgage in the UK from a different country and how our expert expat broker team can assist, please choose your location from the list below:

Europe

  • Austria
  • Denmark
  • France
  • Germany
  • Guernsey
  • Iceland
  • Italy
  • Ireland
  • Isle of Man
  • Jersey
  • Netherlands
  • Spain
  • Sweden
  • Switzerland
  • Turkey

America

  • Canada
  • USA
  • Mexico
  • Caribbean

Asia

  • Abu Dhabi
  • Dubai
  • Hong Kong
  • India
  • Japan
  • Singapore
  • Thailand

Australasia

  • Australia
  • New Zealand

Africa

  • South Africa

Discover the top UK mortgage deals for expats with UK Property Finance, a fully regulated mortgage broker based in the UK.

We have established relationships with the majority of the major UK mortgage lenders who specialise in expat mortgages. These relationships will allow us to identify and provide you with the best deals and mortgage rates on the market.