We are partners with most bridging loan lenders in the UK and get access to the best possible rates for bridging loans and most types of Bridging Loans.
Bridging Loan Provided for Most Circumstances
Funds for business
Urgent cash flow problems
Property Refurbishment and development
Buy to let investments
No chain delay when moving house
Fast Short Term Bridging Loans
UK Property Finance are a “Whole of Market”, Directly FCA Authorised & Regulated, Master Finance Broker specialising in fast access to Bridging Loans, Development Finance & Commercial Finance. Our “Whole of Market” broker status enables us to source the cheapest Bridging Loans & Development Loans from any lender in the market enabling us to provide the very best of rates
Our Bridging Loan, Development Finance & Commercial Finance proposition includes numerous unique & special offers.
We have arranged short term Bridging Loans and Development Loans in all areas of the UK, we can even provide bridging finance to purchase overseas properties and importantly our experienced and continuously highly trained broker staff are on hand daily, for extended hours. This enables your case to be quickly assessed and a formal YES or NO answer given to any Bridge Loan or Development Finance question within minutes.
Due to our many years of experience as cheap short term Bridging Loans & Development Finance brokers, we have a vast array of contacts and huge amounts of experience and as such we are totally confident in saying that whatever your situation, if we can’t help, then it is highly unlikely that anyone else will, so get in touch about bridging finance today.
Bridging Loan Example
One of the main uses of bridging loans is where an applicant does not want to miss out on the purchase a new property (to upsize/downsize/move areas etc.) but have yet to sell their current property.
Current property valuation:
Outstanding borrowing on current property:
New property valuation:
New loan required (the applicant has £200,000 cash)
In the above scenario, we could raise the £300,000 shortfall required to complete the purchase, which would be secured across the current and new properties via a standard mortgage type charge. Normally, the lower the LTV (percentage size of the loan compared with the value of the properties being used as security), the better the interest rate. Due to this, it can be advantageous for the borrower to use more properties if available, to reduce the interest rate charged.
A bridging loan cost calculation using the above example:
Net Loan amount required:
Arrangement fee @ 1%:
Interest generated per month @ 0.59% – no monthly payments required:
If the property is sold after 6 months, the first £300,000 + fees + generated interest etc from the sale would be used to repay the bridging loan and the balance released to the client i.e.
Net Bridging Loan to be repaid:
Arrangement fee @ 1%:
6 months interest @ 0.59%:
Total to repay:
Balance to borrower:
The charge is removed from both properties, when the bridging loan is repaid.
In the above example both properties would generally be used as security as this would be the most cost effective way in which to arrange a bridging loan. If preferred, provided maximum LTV levels are not exceeded, only one property could be used as security however the monthly interest rate available, could be higher.
The better interest rates currently start on loans below 50% LTV and increase at stages thereafter up to 70% on regulated bridging finance and 75% on unregulated bridging finance albeit exceptions are always available in certain circumstances and especially for property in particular hot spots.
The LTV used to choose the interest rate or to define the maximum net borrowing is calculated from the gross loan. The gross loan is the term used for the total of the net or actual loan required plus any arrangement fees added to the loan plus the total interest applicable should the loan run for the full term. We would normally advise arranging a bridging loan for the longest term possible which is usually 12 months (although exceptions can apply) but due to the manner of the calculation, it may sometimes be more beneficial for the borrower, to choose a lower term as this could achieve a higher net borrowing amount and on the best bridging loan rates possible.
The reason for choosing the longest term is that this allows the borrower the maximum possible time available to repay the bridging loan should a problem occur with the initially chosen exit route. Even if the loan was arranged for a 12 month term, the borrower is usually only liable for interest for the time the loan was outstanding. Monthly interest payments are not usually required with a bridging loan, so if the borrower repays the loan after 3 months and 6 days of a 12 month term, they will additionally repay the interest for the time that the loan was outstanding i.e. 3 months and 6 days plus any arrangement or set-up fees that were added to the loan.
Interest is normally calculated on a daily basis after the 1st month.
All terms and conditions connected with the arrangement of the loan will be presented in writing prior to commitment on behalf of the borrower. Unless stated in the T&C’s, early repayment or exit penalties will not be charged if the loan is repaid within the chosen term.
Upfront Costs for Bridging Loans
The upfront costs with a bridging loan should be the same as with traditional finance such as a mortgage i.e. valuation and legal fees.
Bridging Finance vs Mortgages
Bridging Loans, in many ways, follow exactly the same processing route as a mortgage and are often referred to in the loan paperwork as a “mortgage”.
Bridging Loans however have a number of distinct and subtle differences:
Bridging Loans are usually arranged for short term requirements, starting at 1 day and up to a maximum length of 18 months (average 6/7 months). A mortgage is usually arranged for a much longer period as most mortgage lenders have a minimum term of 5 years.
Bridging Loans can be arranged on all types of buildings and land, whatever the condition. Mortgages are generally arranged on habitable property and cannot be used for land purchases.
These loans can be secured on a property as an additional charge such as a 2nd or 3rd charge behind another charge already in situ, such as a mortgage. Mortgages will only be arranged on a 1st charge basis.
Bridging Loans, unlike mortgages, do not usually require monthly payments. In this way, proof of affordability requirements that are needed to achieve mortgage finance are not so relative. As such, people on low or even without income can obtain a bridging loan.
Bridging Loan companies tend to be smaller organisations offering a flexible and personal solution whereas mortgage companies are often much larger organisations and use a “computer says yes/no” mentality
Bridging Loans are often repaid via the sale of the security or other property. Due to this, as refinance is not the exit route, Bridging Loan lenders will often take a view on credit issues that mortgage lenders would never accept.
Bridging Loans can be arranged & completed extremely quickly whereas it can often take weeks just to get a lengthy mortgage appointment arranged with a bank or building society.
Bridging Loans are usually arranged without exit fees so even if the term of the loan is arranged for 12 months, it can be repaid without penalties at any time during the term. Most mortgage finance has penalties if repaid within the initial agreed period.
Bridging Loans can be arranged for 100% of a properties purchase price provided other security can be used. Mortgages of 100% LTV are NO LONGER available.
Bridging Loans can be arranged for basically any legal use, especially business purposes. Mortgage funds can only be raised for limited reasons of which business purposes are often not one.
Bridging Loans can be initiated in either a Ltd company or personal name. Mortgages especially residential mortgages are always arranged in personal names only.
Bridging Loans cater for extreme maximum and minimum loan sizes. Mortgage companies tend to deal more in the middle ground and have a much lower maximum loan size and a much higher minim loan size.
Bridging Loans can be used if the security property has Land Registry title problems such as a property converted into 2 flats but as yet the separate leases have not yet been created. Mortgage finance would only consider properties with a clear and perfect title.
Typically, Bridging Loans can have no age restriction. Mortgage companies have substantially lowered the age allowable to obtain mortgage finance and as such due to other factors such as affordability, it is rarely possible for average income employed people in many areas of the country to obtain the required amount of mortgage finance much beyond their 50’s.
The amount you can borrow is dependent on the value and type of security property being used. This question is very difficult to answer properly without reviewing the case fully however based on 1 property as security, in theory, the maximum loan size available on a regulated bridging loan (arranged on a property where you or an immediate member of your family live, have lived or intend to live in over 40% of the useable floor area) is 70% of the security properties valuation and on an unregulated bridging loan (an investment property where you or a member of your immediate family has never lived, does not live and does not intend to live in over 40% of the useable floor area) is 75/80% of the security properties value.
The above figures are based on the gross loan (including all fees and interest). The net loan (without any fees or interest) would be between 5 & 10% less than the figures stated above.
Additionally, it is possible to borrow a larger amount of say 100% or more of the properties valuation via using additional security. For an example, if you wanted to purchase a property for £500,000 and required the full £500,000 or more you could use other properties as additional security properties to make the deal more appealing and less risky for the lender i.e. if you had another property valued at £500,000 which was unencumbered (without a mortgage) or even if it had a small mortgage, the lender could secure across this property also to allow the full loan amount required.
£650,000 is approximate 59% of the £1.1million value of the securities (£650,000 / £1,100,000 x 100) making the loan acceptable to the lender as the maximum loan allowable in this situation would be 70% LTV of the value of the securities, including all fees and added interest.
As interest payments are not required on a monthly basis, the loan increases in size throughout the term, until repaid. Depending on the scenario, by the end of the agreed term, fees and interest can add a further 5 – 10 % to the size of the original loan.
It may also be possible to use more than 2 properties as security to borrow the funds required and/or to qualify for better bridging loan rates by reducing the LTV.
Lenders will determine the maximum LTV available by adding the net loan plus arrangement fees plus interest generated should the loan run for the full term arranged.
Bridging Loans are arranged for short term requirements and the lender would be expecting the loan to be repaid within the set timeframe.
Bridging Loans are always arranged with the 1st question being, how will the loan be repaid. Brokers and lenders will put a huge amount of emphasis on this point and if the exit does not sound feasible or make sense, then the lender will normally not allow the loan to proceed as the loan will have a good chance of a failure to repay.
Acceptable exit methods are more often than not, sale of property or refinance. If sale is the stated exit route, then a lender would expect agreement that the property to be sold would be either on the market prior to commencement of the loan or on the market within a specified timeframe, such as following completion of certain renovation works. If the exit route is listed as refinance, then lenders will do much due diligence beforehand to ensure that this is a possibility i.e. the lender will perform checks to ensure that the clients credit is likely to be good enough to achieve a refinance at the end of the term and that the income is sufficient to raise enough funds via a refinance to repay the bridging loan plus any accrued fees or charges etc.
Even with very careful underwriting, it is inevitable that some loans will overrun the term agreed as not everything in the housing market goes to plan. Lenders will normally contact the borrower approximately 3 months prior to the end of the agreed term to determine how the exit is coming along. If the lender believes that the exit is looking unlikely, then they will normally make recommendations, such as reducing the asking price of a sale, to help the borrower get the exit back on track.
The lenders clearly want the loan repaid as per the offer but will normally work with borrowers who have overrun provided they are keeping in regular contact and provided they are working together on action plan.
We would always suggest taking out a bridging loan for the longest term available as experience suggests that many plans overrun the expected timeframe.
The industry average term for a bridging loan is approximately 6/7 months. We can however arrange bridging loans from 1 day up to 12 months. In certain circumstances longer terms of 18 months or more can be agreed.
We can source the most competitive rates in the market and we have many special and unique offers that are not available to other companies. Rates can be dictated by LTV, security type, client profile etc. Following a short discussion, our staff are experienced enough to be able to immediately provide a written quotation, showing the applicable bridging loan rates and costs for most scenarios.
Bridging finance is usually determined by the security in the property being offered and the exit route. Providing the chosen lender is happy with the answers on these two points, credit issues should not be a problem.
It is important to note that refinancing a client with credit issues from out of a bridging loan is extremely rare, so the exit route in this scenario would normally be sale.
Certain Bridging loan lenders can arrange a second charge bridging loan by securing their interest by way of an “equitable charge”. An equitable charge still fully secures the bridging loan lender but importantly does not require the authority or permission from the first charge lender prior to entry onto the land registry documentation.
Although most lenders require some income proof, albeit small, a bridging loan is normally arranged with all fees and monthly interest payments added, so no monthly payments to make. This aspect normally removes the need to prove the loan is affordable by income.
As leading UK bridging providers, we have worked tremendously hard over the years in order to streamline the online application process whilst fine-tuning our services for optimum efficiency. We also know exactly what our lenders require in order for an applicant to be successful, which speeds things up dramatically.
The bridging lenders we work with are very flexible when it comes to the type of security they are willing to accept from a borrower. Examples of property that can be used as collateral include primary residences, commercial buildings, mixed-use developments and building plots - regardless of the state or condition of the property or real estate in question.
UK Property Finance are experts when it comes to finding workable solutions and appropriate borrowing products for those who have had credit problems in the past. Even if you are a recently discharged bankrupt, as long as you have the relevant security to offer - we can help!
Yes! Provided you are able to prove your ability to pay and you have sufficient equity in the real estate you are using as collateral, we will find commercial bridging loan that fits in with your needs and circumstances.
As long as there is sufficient equity in the property, once you have deducted the outstanding mortgage balance from the market value, we will find you a suitable product. We arrange second and third charge bridging loans all the time for our clients.
If you apply for a bridging loan through UK Property Finance, you will be charged an arrangement fee. You will also need to pay for a valuation report on the property, or properties, you are using as collateral to secure the loan. Any arrangement fee and legal fees are typically added to the overall borrowing facility and repaid at the end of the term, along with any accrued interest.
A closed bridging loan is a short-term borrowing product that includes a feasible exit strategy as part of the borrower's application. If you can show the lender that you can repay the debt once a certain transaction has been completed by a specified date, then a closed bridging loan is always the most sensible option. Closed bridging loans are the most common type of bridge finance available and have the highest rates of approval.
An open bridging loan differs from a closed bridging product in that the borrower is not required to show the lender that they have a clearly defined exit route in place that will be used to settle the debt, plus any outstanding fees, by an agreed date. Open bridging loans are somewhat trickier to arrange owing to the unpredictable nature of the repayment strategy that will be used. However, provided you have sufficient security, your chances of being approved for this type of finance are still quite high.
Mezzanine finance, or mezzanine funding, is a specialist borrowing product aimed at property developers who are looking for additional funds in order to complete a given project. With mezzanine funding, the bulk of the finance raised will be provided by a main lender with any shortfalls covered by the developer himself and the mezzanine finance provider. Mezzanine finance is typically lent on a second charge basis, with the main lender taking first charge over the assets.
To understand the differences between bridging finance and development finance, we should first look at the common attributes that both types of funding share. Bridging loans and development finance are quite similar in some respects in that they are both short-term, asset secured borrowing products that are intended to the bridge between two or more property transactions. However, with development finance, the money lent by the provider is usually released incrementally throughout the duration of a project - typically as the various stages of completion are met. As the project progresses, it increases in value and the added security that this provides is used collateral to secure the additional funds required to get to the next stage of development.