Bridging 

Dion Dublin drives the bridging market

Brian West

Brian West

Following a hugely successful 20-year career that saw Dion Dublin play for the likes of Manchester United, Aston Villa, Celtic and England, it was perhaps predictable that this likeable and erudite professional would enter the world of football punditry.

Somewhat less likely was his transfer into the booming world of TV property programmes.

There can be little doubt that shows such as Homes under the Hammer which has been running since 2003, have inspired a generation of property investors and developers in the UK.

While the name of the show is a slight misnomer, commercial, industrial and even simply plots of land feature alongside residential lots, there can be little doubt that such shows have played an important role in the huge growth of short-term bridge lending, particularly in the last 10 years since the credit crunch.

2015 was notable for two things in relation to this article.

Firstly, Mr Dublin made his debut on Homes under the Hammer and, secondly, then Chancellor of the Exchequer George Osborne declared war on buy-to-let (BTL) landlords by launching a series of what journalists euphemistically refer to as "tax bombshells".

Thankfully, for the wellbeing of both the BTL and the more general market, Mr Dublin and his colleagues on a huge variety of property shows have been instrumental in helping to underpin demand.

They have educated investors about how they might acquire properties at lower prices, how they can then renovate and improve these properties to enhance their value and, ultimately, achieve greater rental yields or larger capital growth if they sell. 

How exactly do bridging loans help to buy properties at auction?

For those looking to buy a property at auction there are very real time pressures around the financing. A successful bidder must pay a 10 per cent deposit on the day of the auction and usually has just 28 days to pay the balance or risk losing the deposit.

Obtaining a conventional mortgage within this timescale is virtually impossible and, if the property is deemed uninhabitable, all but impossible. This, of course, is where a bridging loan comes into its own.

Bridging loans can be arranged in timescales counted in days and at most weeks, whereas mortgages can literally take months from application to completion.

Furthermore bridging loans can be used in a variety of time-constrained situations, not just for auction purchases. Rates are usually charged monthly and although they have become very much more competitive in recent years they are still reflective of the greater risk to lenders and the shorter time period of bridges.

Bridges typically run from three to 12 months, up to a maximum of 24 months. 

Of key importance to every single bridging loan is the exit strategy. Borrowers must have a clearly defined plan as to how they are going to repay their bridging loan.

Investment properties acquired at auction, or indeed in other ways, will often be refurbished or renovated before being either sold at a profit or re-mortgaged.