Understanding Large UK Bridging Loans: A Comprehensive Guide

As the name suggests, bridging loans can help "bridge" a gap in finances rather than be a permanent financial solution. It is a type of short-term loan secured against property or land. Investment property, buy-to-let property, trophy homes, or holiday homes can be used as security for this type of loan.

Navigating the bridging loan marketplace alone is undeniably challenging, especially if it's the first time you've used this type of finance. There are hundreds of lenders, but many will offer you a generic bridging finance deal that's only partially tailored to your needs if you approach them directly. Lenders are typically UK and European Banks, family offices, UHNW individuals, and bespoke specialist lenders.

The bridging market is astonishingly large, with estimates coming in at £11Bn as of the end of 2024.

There are a multitude of reasons why a bridging loan could be the perfect solution. Uses include but are not limited to:

• Property Purchase – Bridging the gap between the sale of one property and the purchase of the next. Bridging finance allows a borrower to draw equity out of an existing property they own before it sells to allow them to put it towards the purchase of another. It allows borrowers/prospective buyers to acquire a property very quickly. For example, if you are buying from an auction, you typically have 30 days to complete the purchase, and this timeframe can be when looking to get a traditional mortgage in place. This is also incredibly beneficial when looking to take advantage of an off-market or below-market value opportunity. Bridging finance is used by homeowners, developers, and property investors alike for these purposes
• Refurbishment/Renovation/Conversion – There are a vast number of reasons why borrowers use bridging finance to refurbish/renovate or convert their properties. With interest rates having increased substantially in the past three years, property owners are constantly looking for ways in which they can maximise rental income or the equity/value of their property
• Business Purposes – many borrowers release equity from their properties to fund business ventures, and for business cash flow purposes

UK and International Borrowers:

• Bridging loans are available to both UK residents and expats, as well as international borrowers. With regard to international borrowers, bridging finance serves as an incredibly useful method of raising funds to purchase investment properties and second homes.
• Bridging loans are also available for offshore structures and other complex structures. Again, this is extremely beneficial as traditional term finance for those entities can take longer than your standard residential or commercial mortgage. Bridging Finance can allow those borrower types to move quickly in securing a property purchase, or raising capital quickly, whilst the traditional term finance facility is structured and put in place. 

Example Rates and Terms:

• Loan Amounts range from £250k and upwards, and we have lender partners who offer loans in excess of £100m
• Bridging loans are typically available for up to 36 months
• The interest on the loan can be deducted from the gross loan balance on day one to avoid the borrower having to make monthly payments if they would prefer not to. Alternatively, the borrower can service the interest on a monthly basis, should they wish to
• Interest rates can start as low as 0.55% per month, and they generally increase from there depending on the type of borrower, property type, and loan to value
• In terms of what can be borrowed, lenders typically support loans up to 75% of the security property's value
• There are typically no early repayment charges, allowing borrowers to repay the loan quickly without penalty

Unlike traditional mortgages, there are far fewer constraints with bridging finance, making it far more accessible to all borrower types. For example, borrower residency, borrowing structure type, and credit history are just some reasons why a borrower might find it more challenging to secure a traditional mortgage. Bridging finance generally focuses more heavily on the asset itself, making it more easily accessible. Borrowers and Lenders just need to make sure they are comfortable with the repayment strategy.

There are multiple types of properties eligible for bridging finance, including:

• High-Value Individual Residential Properties
• Commercial Properties
• Semi-Commercial Properties
• Residential and Commercial Property Portfolios
• Multi-Unit Freehold Blocks
• Land with and without planning permission
• Complex asset classes

The most common "exit" or "repayment" strategy is via refinancing onto a longer-term mortgage or the sale of a property. There are numerous other routes that can be taken. However, other viable exit strategies are;

• Proceeds from business, be it the sale or an equity event
• Sale of other assets

Navigating the bridging loan marketplace alone is undeniably challenging. There are hundreds of lenders, many of which will offer you a generic bridging finance deal that's only partially tailored to your needs.

These market challenges only grow when navigating larger deals. For example, with deals worth £10m+, there is a small pool of lenders who are able to help. This is where Enness can step in due to our exclusive relationships with these specialist lenders. Enness can help guide you through the tricky market and will get involved in the transaction to keep all parties on schedule and your goal on track, keeping you informed every step of the way. From your first conversation with Enness through to drawdown, your bridging finance broker will be alongside you, answering questions, keeping your plan on route and working tirelessly to get you the results you need.

 

Reach out to speak with a specialist broker today.