Bridging Loans for Property Development
Bridging finance can be a cost-effective funding solution for property development. A flexible and accessible alternative to traditional development finance, bridging loans can be used to fund all types of new builds, conversions and renovation projects.
To learn more about the functions and benefits of bridging finance for property development, contact a member of the team at UK Property Finance today.
Why Kinds of Property Development Projects Are Bridging Loans Suitable For?
Bridging finance can be used for any legal purpose, making it the ideal choice for a wide variety of property development projects.
Some of the most popular applications for bridging loans within the property development arena include the following:
- Picking up low-cost properties at auction and covering the costs of any subsequent renovations needed.
- Purchasing properties to be renovated and sold against which would not qualify for a traditional mortgage.
- Financing the purchase of land, commercial properties or industrial developments for conversion to residential.
- Funding property development projects as a first-time investor where traditional development finance is inaccessible.
It is also possible to qualify for a property development bridging loan with poor credit or a history of bankruptcy/insolvency – call UK Property Finance anytime to learn more.
How Does Development Bridging Finance Work?
Every bridging loan is a bespoke facility, organised in accordance with the requirements and preferences of the borrower. However, the vast majority of bridging loans share several common features, including the following:
- A bridging loan can be authorised and issued within a few working days
- Issued for strictly short-term purposes and repaid within six to 18 months
- Charged at a monthly rate of interest at around 0.7%
- Loans available starting from £50,000 up to £10 million or more
- Borrow up to 75% LTC against the current value of the property/land
- All types of properties and land accepted as security
- Subprime applicants welcome to apply (by some lenders)
Your broker will help you determine whether bridging finance is right for you, during your initial consultation. If you choose to go ahead, your broker will compare deals from the UK’s highest-rated lenders and negotiate on your behalf to ensure you get an unbeatable deal.
How Much Deposit Do I Need for a Development Bridging Loan?
Deposit requirements vary from one product and lender to the next, in relation to the maximum LTV they are willing to offer. Most bridging loan specialists offer loans with a maximum LTV of 70% to 80%, but it is possible to borrow up to 100% in special cases.
The remaining 20%/30% needed to cover the costs of a development project can either be provided by the investor, or sourced as a second-charge (or mezzanine) finance product. Again, your broker will help you determine the most cost-effective option to suit your requirements, and will provide the representation you need to get a good deal.
Getting the Best Deal on a Development Bridging Loan
Experienced broker support holds the key to getting a good deal on a development bridging loan.
Other than this, there are four things that will influence the affordability of the facility you are offered:
- Your Exit Strategy. A ‘closed’ bridge refers to a loan provided to a borrower who already has a guaranteed repayment plan or ‘exit strategy’ in place. It means the lender knows exactly how and when the loan will be repaid.
- Available Assets. An ‘open’ bridge refers to any bridging loan provided where no specific exit date or plan is provided. Open loans typically run for a fixed period of six months to one year.
- Credit History.Subprime applicants are always welcome to apply for bridging loans, but an excellent credit history will almost always pave the way for preferential deals.
- Past Experience. Lenders generally offer the most cost-effective development bridging loans to applicants with an established and probable track record in the field.
Enlisting expert broker support at an early stage will help you present a convincing case and ensure you target only the most appropriate lenders with your applications.
For more information on bridging loans for property development or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.