We are a leading UK bridging finance broker. Using our granular knowledge of the bridging finance market, our experienced brokers work to arrange industry leading funding solutions across residential and commercial properties throughout the UK and Europe.
A bridge loan is a flexible short-term financing product that allows property investors to take advantage of opportunities where normal mortgage funding would not be available, such as when refurbishing a property or repositioning an asset by splitting the title or changing the planning. A bridging loan can also be used when funds are required quickly, such as when purchasing at auction or to stave off repossession.
With hundreds of bridging lenders in the fragmented marketplace, knowing where to start can be daunting. This is where the expertise of bridging loan brokers comes in. Bridging finance brokers make obtaining bridging loans significantly easier. They operate as a go-between for you and lenders in the market, utilising their extensive industry expertise and contacts to identify the ideal finance solution for your unique project and circumstances.
The Benefits of Using an Experienced Bridging Broker
At Tiger Financial, we take pride in our granular knowledge of the bridging finance landscape. With many long years of industry experience, we are experts with extensive contacts and funding solutions. We can provide access to the most advantageous bridging loans in the UK, with flexible terms and good interest rates, saving you time and money. Our database contains over 500 competent bridging lenders and over 200 property development finance companies that offer loans across the United Kingdom and certain Western European countries.
We have worked in this market and have more in-depth knowledge and understanding than any other broker, so please don’t hesitate to contact us for advice.
What is a Bridging Loan, and How Does it Work?
A bridging loan is often the ideal financial tool for property developers who want to take advantage of new opportunities that cannot be funded through traditional mortgage finance. For example, a bridging loan can be used when buying a derelict property for refurbishment, or when you wish to change the use of an asset, such as permitted development conversion of an office to residential use. Property investors can use bridging loans to secure the funds to buy or develop properties before putting them up as collateral for a mortgage.
Bridging loans are often used to pay for properties or project acquisitions while waiting for traditional mortgage funding to become available; for example, when a property is uninhabitable or requires more refurbishment work than just light decoration.
Bridging finance can also be used to unlock equity from other property assets, with this equity then used as a deposit on other investments or developments, thereby allowing the developer to maximise their available opportunities.
When taking on a bridging loan, the amount you can borrow is usually based on the property value rather than the purchase price, so up to 90% could be available when buying an undervalued property. In addition, there are some specialist lenders who will even lend 100% of the total refurbishment cost, provided the total gross loan remains below 70% of the gross development value on completion of the work.
Typically, the total amount of interest for the duration of the loan will be calculated at the outset and deducted from the gross loan, leaving you with a lower net figure. In doing so, this means there are no monthly payments for you to make, and the lender does not have to assess your ability to service the loan. When you repay the loan, any unused interest is returned to you, so you only pay interest for the duration you have the loan.
It can be difficult to know where to find appropriate funding and what steps must be taken along the way.
Fortunately, Tiger Financial, a professional bridging financing broker, is here to help you throughout the process.
What Are the Requirements for Obtaining a Bridging Loan?
To obtain a bridging loan, there are a few requirements:
- Credit profile: When getting a bridging finance application, having clean credit increases your chances of getting the best rates possible. Although getting a bridging loan with a poor credit score is not a problem, but you may pay slightly more.
- Identification and proof of residence.
- Valuation report: This certifies your property’s worth, as well as its ownership information, location, and flaws, among other things. This will be commissioned by the lender, but the borrower will be responsible for paying it.
- Exit strategy: What are your plans for repayment of the loan?
- A business CV or bio. The lender needs to know if you have previous experience.
- Net worth: some lenders will require a personal guarantee, so owning your own home or an investment portfolio, may help your chances of getting the bridging loan.
Why Should I Seek Out An Experienced Bridging Loan Broker?
A bridging finance broker is an intermediary who connects borrowers to lenders. They assist borrowers in choosing the best loan option and support them throughout the process to ensure there are as few problems as possible.
You should always try to find a bridging finance broker who is able help you obtain the most advantageous bridging loan rates. Since all lenders have different interest rates and costs, your broker must know about the wide variety of choices available to you to ensure you benefit from the best deal available for your circumstances.
If you source the best bridging loan broker with years of experience, they will be able to give you the right advice and help you make sure your final decision is the best one for your particular situation.
Benefits of Getting the Services of a Bridging Loan Broker
- Good bridging loan brokers can secure better rates for clients because they have an overview of all the options available to you. They also operate from a stronger bargaining position and can secure special rates that are not available to the general public.
- Brokers stay on top of the financial markets’ shifting currents. The best lenders a year ago might not be the best lenders today.
- Some lenders will not engage with you unless you go through a broker as a matter of policy. As a result, a reputable broker can connect you with even more lenders.
- Brokers simplify confusing processes for you and guarantee that you understand the type of arrangement you’re entering before you commit yourself.
- A bridging broker will review your application documents and flag up any issues that could cause the lender to reject your request, allowing you to address or mitigate them in advance of making an application.
- Brokers save you time and stress by assisting you with the often complex legal requirements of the follow-up process.
Disadvantages of Working With a Bridging Loan Broker.
Their services are not always free, and some charge expensive consultancy fees. Although bridging loans are more time-consuming to arrange than conventional mortgages, some borrowers may be surprised at being charged an upfront fee that’s in the same region as the cost of hiring a lawyer.
Not all bridging loan brokers are the same. You will find varying degrees of expertise in the market. This means it’s much better to hire a specialist bridging finance broker in the UK such as Tiger Financial, rather than a general commercial finance firm.
Frequently Asked Questions
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There are several situations in which a bridging loan can be advantageous. These include:
- Purchasing under value from an LPA Receiver.
- Buying before planning permission is granted.
- Purchasing at an auction.
- Acquiring a buy-to-let property.
- When borrowing against the property’s value (rather than the purchase price).
- For development and refurbishment projects.
- Buying with a deferred consideration.
- When developing currently uninhabitable properties.
- When buying commercial properties.
- When you wish to split the title.
- When being granted a mortgage is not an option.
- When you require working capital.
- When you do not want to pay monthly payments.
- When you require financing in a hurry.
Bridging finance on property takes various forms. The advantage of this is that you should always be able to find a product that fulfils your specific requirements in terms of both scale and cost. We’ll pare down our list to the essentials:
Property auction finance: Property can sometimes be purchased for a fraction of its original cost at an auction. Auction Finance is a form of loan created expressly to help people complete auction purchases quickly. This is advantageous for investors who want to profit from properties that are not being offered on the open market through typical real estate agency methods. In most cases, auction purchases must be completed within 28 days, necessitating the use of an auction bridging loan.
Residential bridging loans: This is a short-term bridging loan that can be used when a conventional mortgage is not suitable, such as when purchasing an uninhabitable property or when the loan needs to complete urgently to lock in a good deal.
Commercial bridging loans: Bridging finance for property development on commercial assets is typically used when changing the class of use; for example, when converting an office to a residential property with permitted development or converting a care home to flats.
Land bridging loans: These allow you to buy or refinance land, usually to obtain or alter planning consent before moving forward with development finance.
Refurbishment bridging loans: Bridging finance is generally used for this purpose. Bridging allows a property investor to buy a home for a bargain price, frequently at auction, and then borrow 100 per cent of the cost of renovations, and then they may sell or refinance once the work is completed.
100% funding is only available in certain circumstances, such as when buying substantially below market value or when using other assets as additional security. However, 100% development finance may be available to experienced developers if they can demonstrate that they have very profitable projects that would be eligible for a joint venture profit share arrangement.
Yes. This can either be in the form of cash, or you can use equity in other suitable properties that you may own, either as a first charge or a second charge.
Because this is taken as a secondary (secured) loan on your property, it is called a second charge loan. This form of loan is for people who already have an outstanding loan on their property. The repayment arrangement of the original loan is unaffected by this second charge loan.
Second charge bridging loans can be used in the following situations:
- When you have substantial equity in either your main residence or your portfolio, and you wish to use it to make further property acquisitions.
- When you wish to unlock equity in your property to use as the deposit for another investment or a property development loan.
Yes. Bridging finance in London and throughout the UK is a short-term finance option that can assist when purchasing a property that may not be suitable for mortgage funding, such as when buying a property at auction or one that requires major renovation.
If you have concerns about keeping up with the mortgage payments, then a bridge loan may be the solution to your problems. Short-term bridge loans give you financial flexibility if you are having trouble paying your debts and can’t afford the monthly instalments. Furthermore, they allow you to combine all of your debts into a single simple-to-handle option.
Mortgage lenders typically resell repossessed houses at a discount. When a house is repossessed, mortgage providers sell it for less than the market price. As the borrower, you are still responsible for those payments if there is a balance left on the mortgage after the property has been sold. As a result, if you have some equity in your home, a second charge loan could give you enough time to sell the property and raise sufficient money to cover your mortgage obligations. Alternatively, you might try selling another high-value asset to generate cash flow while paying monthly instalments on your mortgage.
It is unrealistic to compare bridging loans to other mainstream choices such as mortgages. They are different products that serve different purposes, so it is not appropriate to compare them. Typical pricing ranges from 0.4% per month.
Bridging loans are used to support property investments that are not acceptable for mortgage financing, such as extensive renovations or repositioning a property, such as splitting the title or altering the purpose. Also, because the interest is usually deducted from the gross loan, there are no monthly payments to make, so no underwriting of the borrower’s ability to pay.
Yes, it is possible. The majority of bridging finance brokers in the UK can alert you to lenders who are primarily interested in the property asset’s strength and your exit plan (how you intend to repay the loan when it expires). The main issue is typically how your poor credit history will impact the exit strategy, which may necessitate a decision in principle from the exit mortgage lender to ensure that you can fulfill your obligation.
If the exit strategy involves the sale of your property, the lender may obligate you to put the property on the market before they lend you the money.
When obtaining a bridging loan, there are several fees you may be asked to pay. The overall cost of the loan is determined by your credit history, duration of the loan, the value of your collateral, as well as the LTV of your property.
Here are some of the costs that you’ll need to cover as a borrower:
This is also known as a lender facility fee, and it’s a fee paid to the lender when the loan is disbursed. The arrangement fee is typically between 1 and 2 per cent of the amount borrowed.
Monthly Interest Costs
You will also be responsible for paying interest on top of the arrangement fee at rates of between 0.45 per cent to 1 per cent per month. Rates are usually determined by the degree of risk involved; higher risk equates to higher rates.
The interest can be recouped in three ways by the lender:
- Serviced interest – The borrower must pay interest on the loan every month.
- Retained interest – The total amount owed in terms of interest is determined and will be repaid at the end of the specified loan term once the borrower and lender agree on a rate and a loan term. However, if the borrower chooses to repay the loan sooner, the amount owed in interest is updated to take into account the new loan term.
- Rolled interest – When you refinance a mortgage, the interest generated is included in the loan. Rolled interest is only used when carrying out a property renovation, as the overall amount owed, including the interest, does not exceed the maximum LTV according to the end value after the job is completed.
You’ll be responsible for your own legal fees in addition to the lender’s.
This is the fee charged by the RICS surveyor to assess the value of the property to be used as collateral, and the amount you will pay can vary depending on the surveyor, the location, the valuation type, the asset’s value, and so on. A valuation generally costs between £500 and 1% of the value of the asset.
On completion of the loan repayment, some lenders charge an exit fee. This is typically 1 per cent to 2 per cent of the loan or one month’s interest.
When the borrower pays off the full loan, the bridging loan is settled. There should be a solid exit strategy in place before the funds are released to make sure that the capital required for the bridge loan is available. The property may be sold or refinanced to achieve this.
Bridging loan interest rates and loan-to-value percentages vary depending on the type of property you have. Although the bridging loan’s rates are relatively low, they can fluctuate depending on current market conditions.
Borrowers can take out either regulated or unregulated bridging loans. When the borrower secures the loan against a property they own and occupy, or intend to occupy, it is considered regulated lending. The Financial Conduct Authority (FCA) regulates and authorises loans in the UK. Unregulated bridging loan borrowers, on the other hand, are not protected by the FCA.
The Financial Conduct Authority (FCA) is a non-governmental organisation that regulates the financial service sector to protect consumers, preserve financial market stability, and foster healthy competition.
Regulated bridge loans are managed and authorised by the FCA using the same strict regulations governing home mortgages.
Taking out a bridging loan, like any other loan, comes with its own set of risks if not managed appropriately. Among these are the following:
- Non-payment and late repayments are subject to penalty interest costs.
- Simply having an exit strategy doesn’t ensure that you’ll have the necessary funds for repayment by the end of the loan term.
- Neglecting the small print may result in you inadvertently breaching the loan terms. Working with a reliable and experienced bridging loan broker can help avert this possibility.
- The lender may repossess your collateral assets if you default.
In most cases, a bridging loan is taken because it is the most appropriate and flexible funding solution to allow property investors to achieve their aims. However, some business may wish to explore alternative funding options, before deciding on the simplicity of a bridging loan, such as:
- A second charge mortgage.
- Asset loans.
- Asset refinancing.
- Commercial and residential property mortgages.
- Commercial loans.
- Invoice finance.
- Unsecured lending.
Our doors and phone lines are always open to prospective clients here at Tiger Financial, a highly experienced bridging finance broker in London. All you have to do is call or submit your personal information and the specifics of your project to us.
First, we’ll utilise our expertise and market connections to provide you with a variety of quotations so that you can choose the one that is best for your project. The team will then work with you through the evaluation, paperwork, and legal processes. This procedure might take anywhere from three days to four weeks, depending on how quickly you need it done. Alternatively, please fill in our online contact form and we will get in touch with you as soon as possible.