Bridging Finance could be the right solution for you...
In some circumstances, a standard residential or buy to let mortgage is unsuitable. This may be due to time constraints on purchasing a property or the property itself not being in a condition suitable to be lent on. Bridging Finance could be the right solution in such instances. This is considered short term finance which is usually available on the understanding that the borrower has an ‘exit’ solution or to put it another way, a way of repaying the Bridging Finance in the future e.g. taking out a standard residential or buy to let mortgage.
There are three main examples of where bridging can be used:
The reason to do this would often be to secure borrowing quickly, putting the customer in a position to complete the purchase without a delay e.g. waiting on a property sale to go through or buying at auction. Customers that may consider this could be individuals looking to sell and buy but who find a property which they cannot delay their purchase on e.g., a family looking to purchase a property in an area suitable for schools who want to complete quickly and not lose out. Such Bridging Finance would then be repaid in the future either by taking out a standard mortgage or being repaid once a background property has been sold.
Light Refurbishment Bridging
If the subject property needs a little TLC then this type of Bridging Finance may be the best solution. An example could be a property being bought to be a home but which is lacking a kitchen or a bathroom. Once such works are done then the property can be remortgaged and the Bridging Finance repaid. Alternatively, if a property is being bought as an investment and intended to be let out as a buy-to-let, it may not meet the current EPC requirements for such a property. Bridging Finance can be used to purchase and improve such a property to a standard acceptable to Buy to Let mortgage lenders.
Heavy Refurbishment Bridging
The reason to take out this type of Bridging Finance would be when purchasing a property which needs major development, possibly structurally and non-structurally. The work required would probably need planning permission. Once completed, the property can again be remortgaged and the Bridging Finance repaid by taking out a standard residential or buy-to-let mortgage.
The Myths of Bridging
Bridging Finance is often considered to be expensive however the cost of bridging has reduced substantially over the last 10 years as interest rates have fallen. Today, it is a viable solution if the property or client falls into one of the categories explained above. We work with our clients to discuss the options available to them and also plan their exit strategy, i.e. how the bridging finance will be repaid.
You may also be eligible for Bridging Finance if you are purchasing a property under a limited company. There are lenders that will consider lending on a bridging basis to a limited company provided they have a viable exit strategy.
Most Bridging Loans and Buy to Let Mortgages are not regulated by The Financial Conduct Authority. Think carefully before securing other debts against your property. Your property maybe repossessed if you do not keep up repayment on a loan or other debt secured on it.
If you would like discuss the above then please get in touch with details of your project. We can then review the options available to you and provide you with details of what solutions exist for you and how we can assist you.
Please note: If you are buying, we will liaise with any applicable agents and progress your application as required. We will liaise with the applicable solicitors* through to completion.
*If you are using your own solicitors to buy a property then be aware that many Bridging lenders will require use of their own solicitors which is referred to as ‘Dual Representation’ and can incur additional legal costs.