What is bridging finance?

A short-term loan that typically lasts 1 – 18 months. They are used when immediate funds are needed for long term solutions, typically a new house purchase when the sale of the current property has still not completed. The bridge loan is secured against an asset, often a residential home. 

When are bridge loans used?

Property: When buying a property quickly such as at auction, or when purchasing a property while waiting for a current property sale to complete. Business opportunities: Funding renovations or developments to sell, or covering cash flows. 

Key features of bridge loans: Funds can often be secured within days or weeks, much faster than traditional mortgages. They are typically secured against property (residential, commercial, or land). The interest rates attached are higher than traditional mortgages, this is due to the short-term nature and higher risk. Interest is charged on a monthly basis, and can be rolled up into the cost of the loan at the start, this is a major draw for many when funds are needed quickly. 

Eligibility: Borrowers need a clear exit strategy, as well as an asset for security against the loan. The loan will have to be proven affordable, and is usually capped at around 70% LTV of the chargeable asset. 

Risks: Due to the short term nature of these loans the costs are high, and interest rates and fees can accumulate quickly if the loan extends beyond the planned term. Failure to repay could result in losing the secured property. Any loan secured on residential property for personal use are regulated by the Financial Conduct Authority (FCA). Loans on commercial or for investment purposes may not be regulated.

Summary: Bridging finance is a versatile tool for quick funding needs but comes with significant costs and risks. It’s vital to have a clear exit strategy and understand the terms fully before committing.

I am able to provide concise quotes for both regulated and non-regulated bridging loans. These are often complex cases so please reach out if you have a specific case to discuss.