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Speak to the Bridging Specialists.
Advisors that will help you 'bridge the gap' in your finance.
Chain breaking - buy before you sell your property.
Release finance urgently
Buy a property with a gifted deposit or severe credit issues
Below market value purchase
Properties in poor condition
Financing an overseas purchase
Renovations and refurbishments
Light refurbishments (properties in poor condition requiring internal refurbishment)
Heavy refurbishment (including converting commercial property to residential, extensions, barn conversions, loft conversions)
Experienced or inexperienced developers
New build projects
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How it works and what you need to know:
Bridging loans provide immediate cash flow so you can quickly solve a short term funding problem or take advantage of an opportunity. Bridging is often used in conjunction with a mortgage to buy a property. The bridge is used to complete the purchase and the mortgage is used as the exit strategy (to repay the bridging loan).
Bridging loans can be very complex as they involve two different debts, often from different providers. Finding the best option can be intimating and stressful. Seek specialist advice to ensure you get the finance you require, and products without lenders fees and redemption penalties.
Is it expensive?
Relatively yes, however it starts at 0.47% per month, so under £500 per month for every £100,000 borrowed. Bridging mortgages usually charge a higher rate of interest than traditional mortgages due to the short nature of the lending. This does depend upon the lender as rates can vary quite dramatically. Therefore, it is recommended to seek expert advice so you can receive a mortgage with the lowest possible rate.
Lenders normally charge 2% to set up a bridging loan. Please note: that the lower the set up fee, the higher the monthly interest rate.
There is no charge when paying off the bridging loan and fees can be added.
When is a bridging mortgage useful?
For example, if you are currently living in a house worth £300,000 and have a mortgage to the value of £150,000, and want to move into a house worth £400,000 within a short time frame, a bridging mortgage may prove useful. This is because you may not be able to apply for another mortgage until current home is sold. Also, it can take a long period to sell a home due to administration and market forces, hence a bridging loan would cover you for that period of time.
How do you pay for interest on the mortgage?
You have the option to pay for the interest monthly or add it to the loan amount.
How to exit a bridging mortgage.
This must be clearly thought through as bridging loans only lasts between 12 and 24 months.
The exit must be proven to have definitive and realistic time line. Examples of exits include:
Sale of property or land.
Inheritance in probate.
Release of funds from an investment or pension.
Unacceptable exits include:
Elderly relative who is unwell.
Building a property and selling it.
Obtaining planning permission.
Should the exit require a remortgage then we will process this in tandem with the bridge to ensure a swift and successful solution.
Common uses for bridging loans:
Property auctions or time pressured sales
When purchasing a property via an auction, payment is required quickly (often within a month). As a conventional mortgage can take months to process and underwrite, a bridge can be an attractive option in order to secure the property.
Additionally, the vendor maybe demanding payment on a short time frame or any other scenarios that require payment as soon as possible. A bridge loan would fix this issue and a remortgage can be arranged onto a standard mortgage.
One of the main issues you may face when purchasing or selling any property is chains. For instance, in order for you to buy your dream home, you need to sell your mortgaged property, however this relies on other purchasing party selling their mortgage property and so on. This is often the cause of a breakdown in the sale.
However it is possible to break the chain, as a bridging loan will provide the capital to buy your new home and keep your existing mortgaged property. Then, when your old home finally sells, you can use the equity to remortgage onto a standard mortgage, exiting the bridge.
Whether it is a residential or BTL property, a bridge can be used to fund refurbishments, improvements and extensions.
For instance, you can use a bridge to let to fund vital renovations before letting out a property. Or before moving into your new home, you may wish to carry out home improvements for several months. By using a bridge, you can remain in your old home before moving into your new property once the work is complete.
Short term ownership
As a standard mortgage can take a long time to complete and it is subject to early redemption penalties, it may not be a viable option for short term ownership. For instance, if you are looking to purchase a property, renovate it and sell in on within a few months, a bridge would be a better choice.
Unusual property type
Some properties are simply un-mortgageable. A bridge can offer a solution.
Declined mortgage application
A bridge is usually a last resort for applicants. There are several reasons why you could of been rejected for a mortgage, such as poor credit history, gifted deposit from a non-blood relative, concessionary purchase, no current income. However, if there is a clear exit strategy, then it is possible to remortgage from day one.