Put simply, a bridging loan is a short term loan, secured on property, on an interest-only basis. Short-term means anything from 1 day to 1 year.
They tend to be used by property professionals, buy-to-let landlords or property developers but they also help homeowners looking for specialist finance to tide them over.
Classically, bridging would have been for a client who was selling a property and wanting to buy one but the sale fell through on the first.
They still wanted to go ahead with the first, so took out a bridging loan until they sold their property.
A property developer may use a bridging loan to buy a property which they may spend a few months improving or converting.
Before the 12 month term is up they will have either sold the property or remortgaged it to more mainstream finance so they add it to an existing property portfolio.
The biggest plus of a bridging loan in all these scenarios is speed of completion.
At Enterprise we have completed deals within 48 hours but on average finance is arranged within 2 weeks.
A bridging loan is available for any property in any state, derelict houses, shops, plots of land, in short any property that may not qualify for mainstream finance. Interest rates are from around 0.55 per cent per month, or 6 per cent annualised.
There are no early redemption payments on bridging loans so to exit is free. The minimum amount is £26,000.
The maximum is subject to the loan to value and the property’s value but at Enterprise we see £20 million plus deals.
To access bridging finance efficiently, working with a Master Broker such as Enterprise means access to the entire market-place through a single phone call.
That means you are offering your clients a service that has the power to change their lives. The bottom line is that being able to access alternative finance empowers your clients to maximise their return from property, whether it’s for an investment, their pension or simply home improvements.
Bridging lending increased during the last six months of 2016, and with more lenders moving into the market Enterprise’s Harry Landy explains how the loans work and how they can help your clients
Why your client might want a bridging loan
· The need to complete quickly. For example a property developer might be able to secure a better deal the quicker they compete.
· When they buy through a property auction. Buying through auction means completion needs to take place within 28 days, which is when buyers turn to bridging loans.
· They are in a broken property chain. The buyer may have found an alternative property and still need to complete despite not selling the first property.
· They want to buy and develop an uninhabitable property. They can access and satisfy a loan before remortgaging to a mainstream lender.
· Are renovating or developing a current property. · Have to get planning permission, or are looking to complete a lease extension.