Bridging finance is a form of short-term mortgage secured against property or land. It can utilise investment properties, buy-to-let homes, luxury residences, or vacation properties as collateral.
These loans generally have a duration ranging from one week to three years and are frequently utilised for purchasing a new home prior to selling the current one, as well as for breaking property chains.
Additionally, they can serve as a way to access equity before refinancing with a different lender or to acquire properties at auction, where quick fund settlement is often required.
Bridging loans can also facilitate the purchase of a new home before selling an existing one, finance renovations before a sale, or allow for upsizing or downsizing without the extended mortgage process. The applications for this type of financing are virtually limitless.
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Engaging with Enness auction finance experts ahead of the auction will simplify the process of purchasing this type of property. With this knowledge in hand, you'll be better equipped to make an informed bid, taking into account your borrowing capacity and budget.
Bridging finance is a great option for short-term funding needs. Although arranging short-term bridging loans can be complicated, this type of financing is suitable when you require a substantial amount of capital, even if it's just for a brief period. Discover more about our short-term loans here.
Bridging loans can be utilised in various situations concerning the buying and selling of residential properties. These loans are highly adaptable, with few restrictions on their usage, as long as certain fundamental criteria are met.
Even if you require a substantial loan, it doesn't imply a prolonged process: Enness can swiftly obtain offers for large bridging loans, ensuring they're ready within your desired timeframe.
The international bridging finance experts at Enness will support you throughout the entire process, from negotiating deals to advising on foreign exchange risks and identifying where to seek legal counsel, ensuring that your transaction is smooth, efficient, and hassle-free.
Understanding bridging loans and their functionality is essential for effective borrowing. These loans offer flexible financing solutions but, like any financial product, come with their own set of advantages and disadvantages. It's crucial to be aware of these factors to determine whether bridging finance suits your needs.
Bridging loans are typically utilised in particular situations, such as resolving a property chain or purchasing a home where obtaining a mortgage may not be possible. They can also be a quick way to release equity from a property, allowing you to seize an opportunity or make an investment.
It's important to have a compelling reason for opting for bridging loan finance over other loan types. When seeking bridging finance, lenders will expect to see a well-thought-out plan outlining the rationale for needing this financing and how you intend to utilise the funds.
Enness can help you assess whether bridging finance is the right pathway for you or identify alternative financing options that may better address your circumstances and requirements. Enness will not recommend bridging loan finance if it isn't the best choice for your situation.
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These loans assist with cash-flow challenges or provide liquidity.
Business Bridging Loans
This financing option is one of the quickest, most accessible, and flexible tools available for businesses, usually with no set maximum borrowing limit.
Commercial Bridging Loans
These loans serve as a financing solution for businesses in need of short-term liquidity. Commonly used for urgent large purchases or investments, they can support working capital or property acquisitions.
Residential Bridging Loans
This type of short-term financing is secured against property. It can be utilised for several purposes, including purchasing, refinancing, property development, or unlocking working capital.
Auction Bridging Finance
This option provides more flexibility in the use of the loan funds, specifically for purchasing property or land at auction.
Land Bridging Finance
In this case, the lender uses the land intended for purchase- typically with development or commercial potential- as collateral for the loan.
Bridge Buy To Let Loans
These loans are designed for individuals looking to acquire a property (whether residential, commercial, or mixed-use) with the intention of renting it out afterward.
Self Build Bridging Finance
This is an ideal financing solution for those who plan to construct their own home.
Interest rates are generally higher than standard mortgages because of their short-term nature. The rates depend on factors such as purpose, size, jurisdiction, and risk. Consult a broker today to secure the best interest rate.
Bridging loans can be arranged in as little as 24 hours, depending on application complexity, documentation, credit rating, exit rating and other contributing factors.
A bridge loan is a flexible and efficient financing option, often delivered quickly and tailored to your needs by Enness. It’s typically used when time is crucial or traditional lending sources aren’t available.
While some may view bridging finance as risky, it can be an ideal solution for high-net-worth individuals with a clear repayment plan.
Though generally more expensive than mortgages, its cost can be justified when it allows you to seize opportunities or resolve financial issues quickly.
Specialist advice is crucial to ensure it’s the right choice, especially for large loans of £1 million or more.
Enness provides personalised support throughout the process, ensuring you understand both the benefits and risks of bridging finance. With their expertise, you can secure the best deal while minimising stress and complexity in your transactions.
Yes, you usually need a deposit for a bridging loan, but it depends on the lender and the circumstances of the loan. The deposit amount and collateral will be taken into account. You can use collateral instead of a cash deposit if you offer assets like property, vehicles, or valuables as security. The collateral's value usually needs to be at least as much as the loan.
Interest rates vary depending on the loan type, security offered, and the borrower's plans. Speak to a broker today to see the best terms for your unique circumstances.
As bridging finance becomes more popular, more lenders are entering the high-value loan market. The amount you can borrow typically depends on the property used as collateral and your repayment plans. Some may extend slightly higher or lower based on your financial profile and the property's specifics. To secure the best LTV, having a clear repayment strategy and a strong financial background is crucial.
Bridging finance was originally designed to help sellers purchase a new property before selling their current one, effectively "bridging the gap." Over time, its flexibility has been recognised, with its use expanding beyond just home purchases. One common application is equity release, where a lender provides a short-term loan secured against your property's equity. This can be used for various purposes, such as investing in shares, acquiring or expanding a business, buying a new property, or consolidating debt. Its versatility makes equity release a valuable option for those needing quick access to capital.
When seeking a bridging loan, you have two main options.
1. Approach lenders directly:
This works well if your situation is straightforward or if you're borrowing a smaller amount. Off-the-shelf bridging finance packages can suit a simple scenario.
2. Use a trusted broker like Enness:
This is ideal for high-value loans, non-standard scenarios (such as being a non-UK resident or needing unusual property structures), or international properties. Brokers can find competitive deals for complex situations and tailor loans to your specific needs, such as repayment through unique means like a divorce settlement or business sale.
Overall, if your situation isn't standard, a broker can often provide the best solution.
Bridging loans are often structured so that the interest rate is a percentage of the loan amount, calculated on a monthly basis.
There are three ways to pay the interest rate:
Retained Interest
Your interest payments are taken out of the total loan amount and are used to cover the interest costs as they accrue, meaning you pay the interest on the loan in advance.
Rolled Up Interest
Instead of making a monthly interest payment, the interest is added to the remaining principal (calculated monthly), and you settle the total amount when the loan is paid off.
Serviced Interest
You will be required to cover the monthly interest costs, similar to a conventional mortgage. The way you choose to pay interest will impact the overall expense of your loan, your cash flow, and the amount you can borrow. Based on your circumstances, Enness will help you determine the most suitable interest structure and will reach out to lenders to find your preferred option, ensuring you are in the best possible position.
Open and closed bridging finance refer to the conditions under which you will repay your bridging loan.
If you have a definitive plan for repaying your loan (for instance, if you anticipate receiving funds by a certain date), you would be dealing with a closed bridging loan.
This typically occurs when you need financial support until you receive a specific capital influx, such as a bonus, asset sale, or inheritance.
On the other hand, an open bridging loan is suitable when you're uncertain about when you will have the funds available to repay what you've borrowed. This often applies when you're awaiting the completion of a property sale or a similar situation.
Regardless of whether you choose an open or closed bridging loan, it’s crucial to have a well-thought-out plan for repaying the loan.
Lenders will want detailed information about how you intend to settle the debt, and having this clarity will also provide you with peace of mind regarding your financial choices.
Enness can assist you in understanding the risks and benefits associated with both open and closed bridging loans. Your bridging finance broker will work with you to develop a solid repayment strategy and present it to the lender in a compelling manner.
Auctions can be great opportunities to find property bargains, but preparation is key.
If you're considering bidding, auction finance offers a quick way to access capital, making it easier to invest in a property you love, even if your funds are tied up elsewhere.
Typically, you'll need cash for a deposit on auction day and funds available to complete the purchase within three weeks.
Involving Enness early on simplifies the process, allowing you to secure an in-principle bridging finance agreement and gauge your bidding limits based on what you can afford.
Whether you're a first-time buyer or an experienced developer, Enness can tailor a financing package to suit your needs.
They’ll also support you in aligning your borrowing potential with your property plans, ensuring you can adjust your ambitions as needed.
Bridging finance is commonly used when you need capital in order to biuld or redevelop a property. For example, you may need credit to build or develop a property for commercial use. Alternatively, you might want to construct or renovate your own home or an investment property. You can also use a bridging loan if you have borrowed capital from several lenders to fund work on a property you have already started developing and later plan to sell. In this case, you can pay off multiple lenders and effectively centralise your borrowing, making it easier to manage. Bridging finance for property development is known for being particularly flexible, and the scenarios in which it can be used are very broad.
If you are buying a property in the UK and the property you want to secure bridging finance against is also in the UK, you will have the most options and flexibility.
Options do however exist if you want to purchase property in other countries, or if you want to secure a bridging loan on an international property or transaction.
You will find it is relatively straightforward to borrow as a foreign national, secure a bridging loan against an international property or use bridging finance in order to buy abroad.
There are bridging lenders outside the UK, although there tends to be far less choice, especially at the top end of the market. Your circumstances and the location of the property you want to secure the loan against will also influence how much, and sometimes if, a lender will let you borrow.
If you need a large bridging loan (£3 million or above), you’ll find it hard to get the best deal by approaching lenders directly. This type of loan is fast-moving, complex and lots of different parts need to come together at the same time, which can be magnified exponentially for large loans.
There are fewer lenders in this specialist part of the market, but Enness will be invaluable in getting you the most competitive offer and maximum flexibility. Your bridging finance broker will handle negotiations and ensure your loan is tailored to your situation and meets all of your needs. Once secured, they will keep the deal on track and work with the other parties involved, such as your legal team, the surveyor and your lender, to see the transaction through to completion without any disruptions.
Regulated bridging loans are secured against a property in which you have previously resided, currently live in, or will live in in the future. If you have a property that a family member resides in or will live in in the future, this will also be viewed as a regulated loan.
Regulated bridging loans are overseen by the FCA and as a result, there are rules around affordability. This means that the lender will assess how you will pay the monthly loan repayments. To do this, they will look at your income streams and ensure there is enough of a margin that you can comfortably afford to meet the loan repayment schedule.
Unregulated bridging loans are secured against every other property type, or properties for other uses. Buy-to-let properties, property developments and commercial property, among others, will fall into this category.
Enness covers both sides of the market, and your broker will help you secure whichever type of loan you need regardless of how simple or complex your circumstances, how quickly you need the finance or for what purpose. Enness has access to the largest number of lenders and regularly secures bridging finance for borrowers in all situations, meaning you can rest assured the process of applying, securing and finalising your bridging loan will go as smoothly as possible for all parties.
You can use a bridge loan to buy a house or another type of residential property. Usually, you'll use this type of finance if you want to buy a new home before your old home has sold, effectively using the loan to 'bridge the gap'. You'll usually then refinance the bridge loan on the property you've bought to a conventional loan like a mortgage, although there are various different ways to exit (pay back) this type of finance.
You can also use a bridge loan to buy a house if you need to access capital to make afford the purchase but don't want a conventional mortgage. This might be because you're selling a home and you can use the proceeds to pay off the bridging loan in one go, you'll have a liquidity event (like a divorce settlement, inheritance or the sale of a business).
There are many different reasons why you might want to take out a bridge loan to buy a house and lenders will consider lots of different scenarios, provided you have a solid exit plan, the loan is affordable and you can document why you need a bridge loan to purchase a property.
Bridge loans can be secured much faster than traditional mortgages, which often take 6-8 weeks or longer due to lengthy approval processes. Bridging lenders streamline this by expediting reviews and approvals.
Many bridging finance options come from smaller, less regulated lenders, which allows for quicker access to funds and greater privacy, as they focus more on the deal and your exit strategy rather than your complete financial history.
Bridging lenders are typically more flexible and quicker in decision-making compared to larger institutions. With strong relationships between brokers and lenders, tailored solutions can be provided based on your specific financial circumstances.
Unlike traditional banks, bridging lenders set their own rates and are less affected by base rate changes. They usually offer fixed rates upfront, providing stability for borrowers.
Bridging loans often allow borrowing of significant amounts (usually £2-5 million and sometimes over £10 million) for those with strong financial backgrounds, depending on the property value.
Bridging finance is often simpler and quicker to arrange compared to other financing options. As long as you present a solid repayment plan, the process can be less burdensome and more efficient, appealing to high-net-worth individuals seeking rapid funding solutions.
Navigating the bridging loan market alone can be very challenging, especially if it’s your first time using this type of finance. With hundreds of lenders available, many may offer you a generic bridging finance deal that isn’t fully tailored to your needs when you approach them directly.
Additionally, you are likely to pay significantly more in interest if you take this route. Managing all the parties involved in a transaction while dealing with a bridging loan can be extremely stressful if you’re doing it alone.
Enness can step in to streamline the process and ensure that all parties stay on schedule, helping you achieve your goals without any hiccups. This will save you a significant amount of time, and you won’t have to handle the often tedious yet crucial aspects of the deal on your own. Enness will keep you informed at every step while taking on the workload.
Enness goes directly to the source to secure the best rates and terms that meet your requirements. From your first conversation until the drawdown, your bridging finance broker will be there to answer your questions, keep your plan on track, and work diligently to achieve the results you need.
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