Bridging Loans
Bridging loans are short-term loans, secured against a property, for people who need access to money QUICKLY.
Some Facts about Bridge Loans
- They can be used for business and personal purposes and offer the flexibility and speed that a traditional mortgage cannot provide.
- A bridging loan can be turned around in as quick as 4-5 days as opposed to 10-12 weeks on a normal mortgage.
- It is this speed of completion that enables you to compete with investors who are cash buyers and are normally in best position to negotiate bigger discounts and act quicker or simply free up cash flow to keep your project moving.
Types of bridging loans
Whether you need the money to purchase a property, or to refurbish a house for a quick sell-on, a bridge loan is the fast finance option for you.
1. Open Bridge Loan
No End date, funds repaid normally on the sale of the property, when the money is available or the equity in the property is eaten up by the loan interest.
2. Closed bridge loan
Fixed agreed end date to repay the loan. Normally short term up to 12 months.
Common uses of a Bridge Loan
- Buying at auction​
- Refurbishing a property​
- Building a property​
- Purchasing Land​
- Purchasing a property that is not mortgageable (i.e. with no water or electric connected or not acceptable building construction)
- Divorce settlement​
- Solving short term cash flow issues.
- Property flipping
- Business bridge to pay for Tax and VAT payments​
- Funding of stock for your business​
- Refinancing an existing lender​
Benefits of a Bridge Loan
- Loans can be secured against various types of property including residential or commercial.​
- Quick way to release capital/equity tied up in property ​
- Get the short-term loan of up to 85% LTV of your property’s value.​
- Minimum criteria requirements to be able qualify for bridge i.e. No minimum income​
- No/Minimum prior experience required
- Interest can paid monthly or deferred and added to the total loan to be paid at end.​ ​
- No early repayment charges as interest calculated daily​
- Loans can be from as low as 0.4% per month​
- Loans can be from £25k upwards and taken for 1 day up to 24 months
- Interest is fixed as per agreement​
The cost of a Bridge Loan
Bridge loans albeit convenient, come at a higher cost than a standard mortgage. The interest rates are higher as you are borrowing the money for a shorter period of time and also with lower criteria.
Loans can be taken from 1 day to 24 months (typically 9 or 12 months) and at the end of the agreed term, you have to pay back a lump sum. All the costs and charges to take the loan are calculated in the beginning and the GROSS amount is what will make up the lump sum.
All the interest and charges are then taken out and paid to the lender and the NET amount is sent to your account for you to use.
You are charged interest daily for the agreed term and all the associated fees are rolled up and added to the lump sum but in some cases the interest is paid as a monthly payment for the agreed term, wherein the lump sum will be due to be paid. The positive with the daily interest charges means that if you decide to pay off the full loan early, you will have less interest to pay.
Apart from interest, there are other associated costs;​
- Facility/arrangement fee ​
- Valuation fee ​
- Bank transfer fee ​
- Admin fee ​
- Legal/solicitor fee.​
- Broker fee​
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Our Mortgage Calculators
We have a range of calculators to help make things simpler for you, from finding out how much you can borrow to calculating the impact of an interest rate change on your repayments. Have a go.
Bridging Calculator
Use our bridging loan calculator to see how much you could borrow.
How much Stamp Duty will I pay?
Use our Stamp Duty Calculator to see how much you could be paying in
stamp duty.
Required Documents Checklist
Use our custom checklist full of helpful tips and advice for people who are planning on buying their first home.
10 ways to boost your Credit
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Frequently Asked Questions
How can I use bridging finance at an Auction?
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