Bridging Loans are also known as short term loans and were traditionally used to enable people to buy property at auction. Quite often, auction property is not only uninhabitable, it is also unmortgageable so the only way someone would buy a property at auction was if they had cash.
Not any more.
In 2019, bridging loans are used all the time…To buy property at auction is just one aspect of their uses but borrowers also use them to buy land that hasn’t yet got planning permission, buy a farm, office, warehouse or even a hotel that a traditional mortgage lender wouldn’t lend on.
The other thing to note about a bridging loan is that they allow people with poor credit to get a mortgage. Unlike a traditional residential mortgage (which most banks and building societies offer), a bridging loan is really all about the asset…The security as it is known.
This security, in the form of land or a building, is what lenders will base their lending decision on…Not the borrower.
Bridging loans are a type of funding that allows you to “bridge the gap’ before additional, more longer term finance is available.
Yes it is like a traditional mortgage but the major difference is, it allows toy to buy a property or land without having to worry too much about your credit history.
You see a bridging loan is based on the asset, in most cases property but also land.
There are over 300 different bridging lenders in the UK (yes, 300!)…Some are major financial institutions like banks and some are specialist lenders you may have heard of like Aldermore or Shawbrook.
However, there are literally hundreds of smaller, alternative finance lenders who generally take more risks than the big banks and this allows them to lend against unusual or unmortgage assets.
It could be buying a house at auction. It may be buying another property before you have sold your existing one or it may even be because you want to buy a piece of land that doesn’t currently have planning permission.
Whatever the reason, a bridging loan can be quick and relatively simple to apply for. As most lenders are looking at the value of the security (land or property) and not you, it enables them to lend money quickly and with little fuss.
How much can I borrow with a bridging loan?
You can borrow anything from £100,000 right up to £10m usually. Of course, some brokers will make out that you can borrow up to £50m but that usually only applies with development finance, not bridging.
If only! Everyone asks this question but the simple answer is no, they don’t. The usual excuse is that offering a bridging loan is riskier than offering a residential mortgage for example and we get that.
However, if you choose the borrower carefully, the quality of the asset or security is good and you do your usual lender due diligence, then there is absolutely no reason at all why banks and other high street lenders should’t offer bridging loans.
Compared to a normal mortgage then yes, they are.
But you have to remember…These are risky products for lenders. Yes, if it goes well then both the borrower and the lender can earn a LOT OF MONEY. However, if they get the deal wrong then both the lender and borrower could be in a lot of trouble.
Nope. We are professional mortgage brokers. We know and understand bridging finance, commercial mortgages and development finance inside out.
So if you want to work with us, you are serious then all is good and we will not charge a broker fee.