Bridging Loans for Property Development

Bridging finance can be a cost-effective funding solution for property development. Bridging loans, a flexible and accessible alternative to traditional development finance, 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.

What 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 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

You can also qualify for a property development bridging loan with poor credit or a history of bankruptcy or insolvency. Call UK Property Finance anytime to learn more.

How does development bridging finance work?

All bridging loans are bespoke facilities, 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:

  • Bridging loans 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 of around 0.7%.
  • Loans are available starting from £50,000 up to £10 million or more.
  • Borrow up to 75% LTC against the current value of the property or land.
  • All types of properties and land are accepted as security.
  • Subprime applicants are 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 an ‘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.
  • 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.