A bridging loan (also referred to as a bridge loan or bridge finance) is a form of short-term property finance that allows property developers to buy or refinance a property asset when a mortgage is not the best option eg a property that needs renovation works, converted from a commercial, title changes or if buying at auction when a loan facility is required as quickly as possible.
What is the difference between a bridging loan and a mortgage?
The difference between bridging finance and a mortgage is that the loan can be secured against a property that may not be suitable for a normal term loan i.e, an uninhabitable property that is to be refurbished, a property whose title will be changed, or if the class of use of the property is to be changed throughout the course of the loan. In fact there are many different uses for a bridging loan.
Funds are available much more quickly than a mortgage; typically within 3-4 weeks, and the bridge loan is often based on the OMV of the property, rather than the purchase price, which is useful when buying BMV or from a receiver/auction house.
Also, the interest payments for the bridging loan facility can be rolled up throughout the term, which means there would be no monthly interest payments to worry about.
How long can bridging finance be taken out for?
As a short-term loan, they are generally taken out for between 3-12 months, but can be for up to two years.
As a leading UK broker for all forms of property development finance, we work tirelessly to ensure you receive the best rates, market-leading customer service, and the most efficient financing process in the business.
How much can I borrow for property development?
The amount you can borrow and the interest rate are dependent on many factors. Below is a list of the main factors that affect the loan amount that you can borrow for your property finance:
• Borrower's experience
• Borrower's credit history
• Borrowers background net worth
• The land cost/purchase price
• The build cost/refurbishment cost.
• The gross development value
• Whether it is a new build, mixed use or multi unit.
• The feasibility
Who can benefit from Development Finance?
Development finance is typically sought by individuals or companies that are looking to undertake a property developmental project but face issues securing funding via traditional routes such as mortgages. Development finance can be used in various ways from the initial land acquisition to covering all the costs of construction.
How does Development Finance differ from Traditional Mortgages?
For traditional mortgages, lenders tend to assess the current value of the property and then offer a loan based on that, taking into account the borrower's eligibility. However, with Development Finance, lenders focus more on the predicted value of the property once the project is completed.
Buy-to-Let Mortgages are for individuals looking to buy property for investment purposes rather than as a place to reside.
How much can I borrow for a Buy-to-Let Mortgage?
This entirely depends on the size of your deposit, your personal situation, and most importantly, the rental income you will receive from the property. Lenders usually require you to earn more in rent than your monthly mortgage payment.
Do I have to pay a larger deposit for Buy-to-Let Mortgages?
Yes, this is usually the case. Lenders typically ask for a deposit of between 25% and 40% of the property value, meaning you will need a significantly higher deposit than you would for a residential mortgage.
A commercial mortgage is a loan secured on a commercial property such as an apartment complex, a shopping centre, a warehouse or an office block. The loan is typically used to acquire, redevelop, build or refinance a commercial property project.
What are the benefits of a Commercial Mortgage?
The interest on your commercial mortgage is tax-deductible. In addition, any subsequent increase in the value of your property will be reflected in your capital.
Are Commercial Mortgage interest rates high?
While Commercial Mortgage interest rates may be higher than those charged for a residential mortgage, you are more likely secure better interest rates than if you take out a typical business loan.
100% Development Finance
This is a type of Development Finance intended to fund an entire project, from buying the property and paying stamp duty to covering all the construction costs.
Who can benefit from 100% Development Finance?
From cautious first-time developers to experienced developers facing cashflow issues due to the right project emerging at the wrong time, 100% Development Finance can be invaluable for anyone who needs entire funding for a project without any upfront costs.
How is 100% Development Finance repaid?
Great question! The payback terms of 100% Development Finance differ from lender to lender. Some lenders require a 50/50 profit share. In other instances, you might be required to pay interest on funds in exchange for splitting the profits in your favour. In order to entirely avoid profit sharing, additional collateral is necessary.
Have more questions? Here, we answer some general queries about our services.
Does Tiger Financial assist in the loan or finance process?
Absolutely! We’re on your side and with you every step of the way as we help you to secure funding for your projects and achieve greater heights. We have access to a huge network of lenders to ensure we can match your circumstances to a suitable source of finance.
What is the difference between a Bridging Loan and Development Finance?
While there are many similarities between the two, the main difference is that with Development Finance, funding is usually released incrementally by the lender throughout the duration of the project. At varying stages of completion, as the value of the property increases, additional funds are released with the new property value serving as collateral.