Short Term Bridging Loans
Mark & Joy Dowell No Comments

A Guide to Short Term Bridging Loans

Bridging for Property Refurbishment

Bridging loans often seem complicated to clients but in reality they are just like any other loan but taken over a very short term usually 3 to 12 months.

There are many specialist lenders in the market place, which we have access to and the loans are sometimes separated into categories such as light refurbishment or heavy refurbishment but essentially still just a short-term loan.

TIME

Because of the relatively short timescales of the loan approximately 1 day to 24 months the lenders look at this as a slightly higher risk profile and the interest rates reflect this and as with other loans on property the LTV is usually capped out at around 75%, although sometimes can be higher. Bridging loans can completed in less than a few weeks although a month is generally more realistic

RATES

Current rates are around 0.64% pcm at 75% LTV,  0.55% pcm at 65% LTV and 0.44% pcm at 55% LTV for a light refurbishment loan , Heavy refurb has a slightly increased risk profile of 0.1%. Again please bear in mind these are best rates for lower risk projects and people.

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SECURITY

Most bridging is secured on the property or asset in question and a value will be determined usually at current market value, sometimes the borrower in question will also require to have credit checked and be able to prove affordability. Occasionally funding can be made available on the post developed value but here the client will usually need security to cover the full amount loaned. Loans can be secured on both Residential and Commercial Property Assets and Land / Development Sites. In some cases lenders can take other assets as security for the loan such as Luxury Cars, Art, Jewellery etc.

ADVICE

Our advice would be to always proceed to ensure you can get funding before purchasing your property for example: at auction as bridging can be a relatively smooth and quick form of lending, however it is easy to run into time delays as lenders now require generally to gather more info before releasing the money.

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USES 

Buying a bargain property at ‘Below Market Value’, Buy a property which is deemed ‘Un-mortgageable’ and requires significant refurbishment, Moving home before your current property is sold, Buying a property at auction and needing funds quickly to complete on the purchase, Raising cash to buy a Business, Purchase Stock or perhaps buy out a Business Partner, Raising cash to pay a Personal or Business Tax bill, Raising cash to stave off a repossession order, Raising cash to stave off a repossession order.

EXAMPLE

Although generally you will require a 25% deposit on a LTV of 75% please remember that some lenders will add on the interest and take this from the gross amount of the loan, meaning that if for example you were expecting £75,000 on a purchase of £100,000 with £25,000 deposit and for argument say interest was £3,000 then you may only end up with £72,000 or even less when valuation costs, lender and broker costs are taken off the loan before drawdown, so you may only end up with around £70,000. To get round this you can pay off the interest as you go if you can afford to, so a compromise is always required. The lenders will also usually require in the case of a refurb that deposits be readily at hand too.

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YOUR EXIT STRATEGY

The lending bank will also want to know your exit strategy, how will they get their money back? ie are you going to sell the property, If so How much? When? Etc. or are you going to keep the property and rent it out, having transferred the property on to a BTL mortgage and again how much rental income will be generated etc. Supporting documentation on these and other things such as schedule of works or the refurb should also be provided. Just remember the more information you can provide means the lender will see you as a safer pair of hands and will be more keen to lend and lend at better rates.

 

 SPECIALISTS

If you are looking for a bridging or short-term loan then we have specialist that can help and we have access to whole of the market place in terms of the banks and alternative finance lenders.

CONTACT

Feel free to get in touch for a free consultation by Email at enquires@hadriancapitalfinance.co.uk or Telephone 0191 268 2157