There are a number of ways for borrowers to secure a bridging loan, from approaching lenders directly to doing so via a mortgage broker.
However, because mortgage brokers aren’t always specialists in short-term finance and aren’t familiar with the latest products and rates, Danny Waters, chief executive of Enterprise Finance, suggests often the best way to secure a bridging loan is via a specialist distributor.
For brokers and intermediaries, Mark Posniak, head of sales and marketing for Dragonfly Property Finance, says the first port of call is usually a packager or ‘master broker’ that focuses exclusively on specialist loans, including bridging finance.
“I would always suggest speaking to a master broker in the first instance. They will know exactly which lenders will be able to serve your client’s needs – and just as importantly, which aren’t worth approaching at all.”
Once the broker has submitted a proposal to the lender, the lender will give the loan an initial appraisal to ensure the security available meets the lending criteria.
Alan Margolis, head of bridging at United Trust Bank, adds that lenders will check there is an acceptable loan-to-value percentage.
“The lender will also have a strong focus on the exit, meaning that they will want a clear and realistic means by which the bridging loan will be repaid within the term. This may be by selling the security property, selling another property owned by the borrower or by realising other non-property related investments.
“The security property (or properties) will be valued, the lender and borrower’s legal teams will work together to prove that the borrower has good title over the security and together they will agree a structure for the financing.”
The borrower may also need to satisfy various other requirements, depending on the circumstances, before the loan can be released.
Mr Margolis continues that some lenders may have upfront fees payable before drawdown, although most specialist lenders deduct fees from the loan monies.
In some cases, he says the loan, or part of it, may only be made available when certain milestones are achieved.
For example, some of the loan might be retained pending works being certified as completed, by an architect or building surveyor appointed by the lender for this purpose.
“Bridging is a bespoke financing solution and each borrower’s circumstances differ.”
In nearly all cases, Rob Jupp, incoming chairman of the Association of Bridging Professionals, sayd the client will be responsible for upfront valuation costs and lender’s legal costs, plus there is typically a facility/arrangement or completion fee due on completion of typically 2 per cent.