Bridging Finance & Development Finance

UK Bridging Finance Explained

Commercial bridging finance is a loan, or short-term mortgage, usually for a period of 12 months or less, which may be used towards the purchase of a property, to consolidate debts or to resolve a temporary cash flow situation within a commercially operated business. The loan or short-term commercial mortgage is secured against existing property.

ENQUIRE NOW ! - ASK US ANY QUESTION - CLICK HERE FOR UK BRIDGING FINANCE

Please Note: Bridging Finance / Commercial Mortgages are NOT regulated by the Financial Services Authority as they are regarded as a commercial investment transaction.

Bridging Finance UK continued..

Commercial bridging finance is a loan, or short-term mortgage, usually for a period of 12 months or less, which may be used towards the purchase of a property, to consolidate debts or to resolve a temporary cash flow situation within a commercially operated business. The loan or short-term commercial mortgage is secured against existing property.

 

Why use Bridging finance?

1. Tight deadline- Most auction houses have tight deadlines for completion and in the current market these are very difficult to achieve using a traditional Buy to Let Mortgage. Our lenders provide funding within 7 to 10 days giving you peace of mind. For further assurance we can conduct a valuation before the auction and provide indicative terms, so you can go to auction knowing exactly how much you can bid and how much the funding will need.

2. Property un-mortgageable in its current state- Often properties at auction are in need of works or refurbishment. Having no kitchen or bathroom for example can mean that traditional Buy to Let lenders will not lend on a property or will ask for a significant retention of funds. Our lenders will take a commercial view and, often lend without the retention. Our funding enables you to do the necessary refurbishment work, bringing the property up to the required standard needed for a Buy to Let refinance deal.

3. Add value before refinancing- For many investors, using bridging finance provides the best way to recoup deposit/refurbishment funds and therefore maximise return on investment. Bridging funds are used to purchase the property and then upgrade/refurbish giving an uplift in value. Upon revaluation you are able to re-finance against a higher value, which in most cases results in recouping all of the deposit and refurbishment funds. Using a bridge means the purchasers funds are “tied in” for a very short period of time, cash flow is maximised.

4. Credit repair- In the current market a poor/adverse credit profile will make obtaining a mortgage very difficult and/or extremely expensive. A bridging loan of between 6 -9 months will give you the opportunity to repair your credit file before re-financing into a long term mortgage at a more competitive rate.

5. Buying a property to sell quickly- When an investor is buying a property to sell quickly (flip on) the fees associated with a mortgage (set up, Interest, ERC) can outweigh the costs of a bridge. Some of our lenders have no minimum term enabling you to sell quickly without paying further interest.

6. Sales under Value- In the current market many purchasers/investors are buying property below market value. Our lenders will take a commercial view and in certain circumstances lend against the “Open Market Value” of the property. By lending against the open market value, the deposit needed by you is reduced again easing cash flow therefore increasing your return on investment and making the auction purchase achievable.

 

Bridging finance Explained more ...

A bridging loan is a short-term loan secured against a freehold or long-leasehold property allowing business people and individuals to:

• Borrow money against market actual market value of a property rather than a discounted purchase price.
• Purchase one property before completion on the sale of another
• Arrange temporary funding for the purchase of a an un-mortgagable property pending repairs.
• Fund the purchase of a property in need of refurbishment, with a view to resale on completion of the improvements. In these circumstances we can also arrange additional funds cover the cost of the works.
• Beat a deadline to buy a property, for example funding the urgent purchase of a property pending arrangement of a long-term mortgage. This can be particularly useful in auction situations
• Release cash quickly without being tied into a long-term mortgage
• Borrow short-term against the value of a property, not against income multiples.

The list is nearly endless, but the common denominator for those requiring bridging finance is that the loan is required at short notice.

What is Bridging finance Secured Against?

Whether you need business bridging finance or personal bridging finance the UK funds can be secured against residential, semi-commercial or commercial property, or indeed a mixture. Bridging finance companies will lend against freehold or long-leasehold property anywhere in the UK on a first or second charge basis. Below are some examples of the types of property often used to secure a bridging loan:

• Residential property, including investment property and HMO's
• Residential developments
• Commercial property, including factories and warehouses
• Commercial developments
• Offices & Retails units
• Land (even land without planning permission)

Due to the short-term nature of bridging finance the rates can seem expensive at first glance, however it is worth considering the costs against the benefits of having funds arranged quickly.

Bridging finance come in two varieties - "open ended" or "closed". An open bridging loan requires no pre-arranged exit for the lender. A closed bridging loan is where there is a guaranteed exit for the lender. This is normally in the form of a sale place. Other forms of firm exit routes can also be used. Closed bridging loans generally are for a much shorter term than an "open bridge" however funding of up to 12 months should not be a problem. The rates for an open bridging loan are usually higher than for a closed loan due to the increased risk for the lender. Bridging finance can become complex as the lender may often require the borrower to put up his new home as security for the loan in case the borrower does not have enough other collateral for the loan to be secured on.

An 'open' bridge is taken out by buyers who have found their ideal property but have not yet put their own property on the market. A lender will usually ask more questions and want more supporting documentation. A lender will also insist on you having lots of equity in the security properties. A closed bridging loan may be used when a secure date for the exit of the bridge is definite and with a set completion date. As this is less risky the lender charges a lower interest rate. An open bridging loan presents higher risks for the lender. This situation arises when there is not an exact exit date for the loan. The borrower may in fact be seeking a mortgage to remove the bridge. The open nature and uncertainty of an open bridge means higher interest rates and higher loan costs. The benefits are that bridging finance is delivered fast

 

What exactly does the term development finance relate to?

It's basically funding to build both commercial and residential property or to carry out large scale renovations to existing property.

So does development finance relate to improving residential property to sell at a profit, as seen in television property programmes?

As a general rule of thumb no.  The sort of work you tend to see on television programmes is small scale and would be carried out using a refurbishment loan.

The first thing to consider with development finance is actually the type of funding you're looking for or need.  There is a difference between refurbishment loans and development finance.  A refurbishment loan would be taken out if a property was in a shabby state and needed some basic internal work carried out whilst development finance would be used for a fairly serious building project or some major additions / building works to an existing property.

Examples of property that may qualify for bridging finance;

• Shop with flats above
• Take-Aways
• Restaurants
• Pubs & Restaurants (with or without self-contained residential accommodation)
• Retirement Homes and residential care homes
• Nursing Homes with owners accommodation
• Guest Houses and Bed & Breakfast
• Retail premises
• Office Buildings
• Warehouses
• Buy-to-Let investment property
• Houses of Multiple Occupancy (HMO)
• Garage showrooms
• Hotels
• Light Industrial property
• Holiday Let Property
• Equestrian centres with residential accommodation
• Block of flats
• Houses in Multiple Occupancy
• Freehold flats and maisonettes
• Flats above commercial properties
• Ex Local Housing Authority properties
• Studio flats and bedsits
• Multi unit properties
• Commercial industrial units
• Commercial property development
• Farm Property and Land
• Professional Practices  Dentists - Architects - Accountants
• Retail Sectors
• Private Schools and Nursery

 

Page tags bridge finance,bridge financing,bridging finance
bridging finance loan,bridging finance uk,bridging loan finance,building development finance,business bridging finance,commercial bridging finance,commercial development finance,development finance,development finance uk,development financing,fast bridging finance,finance and development,finance bridging
finance for property development,property bridging finance,property development finance,property development finance uk,residential development financeagricultural mortgages,hotel mortgages,farm mortgages,mortgages for factories,mortgages for hotels,pub mortgages,public house mortgages,commercial property,commercial property finance,commercial bridging loan,commercial remortgage,commercial bridging loans,bridging loan,bridging finance