Bridging Finance – short term, high value borrowing

In certain situations there isn’t enough time to arrange a mortgage for a property purchase. If you need to borrow a large sum in a short timeframe, bridging finance could be the answer. 

What is a Bridging Loan or Bridging Finance?

Bridging loans are short-term, high-interest rate loans. This type of finance can ‘bridge’ the gap between the sale and completion dates in a chain, or buy property at auction. A typical term for bridging finance is 12 months.

How Does Bridging Finance Work?

Generally you will need a specialist company for this kind of loan. They are very quick to arrange as you will repay the loan in the short term. Bridging finance has high monthly interest, which you add to the overall loan total. 

Most lenders will lend up to 75% Loan to Value – so you need a 25% down-payment. Your loan is secured either against the property you’re buying and/or any existing property. 

Bridging Loans are fairly flexible – there are rarely early repayment charges or legal fees.

How Much Does a Bridging Loan Cost?

The full cost of a Bridging Loan depends on the size of the loan, the interest rate and the arrangement fee. You may also need to pay valuation fees for the property you’re buying. 

How much can you borrow with a Bridging Loan?

It varies widely. Some providers start lending at just £5,000, while others will go as high as £10 million.

What is Development Finance?

Development finance is a type of borrowing specifically designed to help you build or renovate a property, releasing money at different stages. Generally, bridging loans are more flexible and faster to obtain than development finance. Development finance may be a more affordable solution if you want to borrow over a longer term.

What is Mezzanine Finance?

Mezzanine loans are a kind of ‘hybrid’ borrowing that allows you to top up a loan if it doesn’t stretch to the amount you need. It’s commonly used in commercial property development. 

What alternatives are there to Bridging Finance?

The alternatives will depend on what you’re aiming to achieve. A personal loan or a second mortgage may work for you. Another option is Let-to-Buy, where you get a Buy to Let mortgage to let out your residential property and purchase a second home.

Why is it a good idea to speak to a Mortgage Adviser about Bridging Finance?

Bridging loans are an expensive way to borrow, so it’s important to explore all your short term finance options. We will look at your specific situation and credit history, and talk you through the pros and cons of different financial routes to achieve your goals. 

We are fully authorised and regulated by the Financial Conduct Authority and registered in England. Contact our registered office in Preston today for a chat about how we can help.

Mortgages by Mcateer Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS. SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.