When a property investment opportunity presents itself and you need access to finance fast, or when a regular mortgage may not be suitable or available, then a residential bridging loan can be the ideal solution.
Bridging loans can be used for all property asset classes, including semi commercial, commercial, and land with planning.
If you need a residential bridging loan to purchase, refurbish, or refinance a residential property, speak to Tiger Financial today, and let us help you broker the best residential bridging loan for your project.
Before using a residential bridging loan to fund your investment, you should take time to understand the versatility of this type of financing, which could open many property investment opportunities that would not otherwise be viable.
Essentially, residential bridging loans are an alternative source of finance when a regular mortgage may not be suitable. They enable you to react in a timely manner to a potential opportunity, by providing you access to fast and flexible funding. Once you have used the residential bridging loan to execute your strategy i.e by refurbishing, attaining planning consent, or changing the use, you can then refinance on a longer term mortgage or sell the asset to realise the gains.
For example, if you're purchasing property at auction, if you're renovating an uninhabitable property, a normal mortgage would not be possible. However, with bridging, you can take advantage of these opportunities.
Bridging loans give you access to short term finance designed to 'bridge' the financial gap, enabling you to purchase, refurbish, or refinance a residential property quickly.
A bridging loan works by the lender taking a first charge or second charge security of an investment property asset, or in some cases, a 2nd charge against their current home if they have enough equity and it is being used for business purposes.
A bridge is used when a mortgage is not available i.e when refurbishing an uninhabitable property, or when changing the use, to take advantage of permitted development.
Although more expensive than a normal mortgage, a bridging loan allows property investors to unlock value in property assets, that otherwise would not be available.
Typically, there are no monthly interest payments to service, with the total interest usually deducted from the gross loan, leaving a lower net figure. However, with certain refurbishment products, where the property value is increasing, the interest can be added to the loan.
When the loan is repaid, i.e when the property is sold or remortgaged, any unused interest will be returned to the borrower.
Bridging loans are available for all types of borrower, including those with limited experience, poor credit and non residents.
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There are numerous benefits to taking out a bridging loan rather than a mortgage to fund your property investment. For example:
Funds are available to you much more quickly when you take out a bridging loan (3-4 weeks)
Bridging loans tend to be based on the open market value of the property, rather than the actual purchase price
Plus, an application for a residential bridging loan can be turned around much more quickly than a mortgage application loan
Mortgages typically require full underwriting of the borrower and their financial position, however bridging loans are based on the asset strength, rather than the borrower's income.
Mortgages typically have quite high early repayment charges for the first few years.
Bridging loans are typically used when a mortgage is not available, so a direct comparison is not usually accurate i.e if a property requires a lot of refurbishment work.
A residential bridging loan is a type of secured loan, meaning the loan will be secured against your property. If you struggle to keep up repayments your property may be repossessed.
You will normally be required to provide evidence of your exit strategy that shows you can repay the bridging loan balance, before receiving a formal loan offer.
If you fail to repay the loan on time, some lenders can charge a higher rate of interest on the default balance.
This will depend on your precise circumstances - your personal and financial situation, as well as what you're looking for when borrowing funding.
If need a large loan of over £100,000, over a short period of time, and you know you'll be able to make repayment within the agreed timeframe (typically one year), then a bridging loan may suit you.
To be eligible for a bridging loan you'll ordinarily need to meet the following criteria:
You need to be over 18 years of age
You will have a valuable asset i.e. a house, to secure the loan against
You will need to have a realistic idea on how you will repay the loan - the "exit strategy"
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You can apply for your bridging loan through Tiger Financial with these four steps:
Simply fill out online form to request a call back, or talk to us on 020 7965 7261.
Our experienced, knowledgeable team will work with you to get a selection of quotes that are most suitable for your project.
You choose which product/lender is right for you, and we will send you the application form and a list of supporting documents that you will need to collate.
We'll be with you every step of the way to advise and help broker the deal, giving you the best possible chance of securing funding at an attractive interest rate for your project.
Typical bridge loan costs are higher than mortgage costs, because a bridging loan is used when a mortgage would not be suitable or available i.e when refurbishing a property.
To give you an idea of how much one might cost you, interest rates on a first charge loan can range from 0.35% up to 1.3%pcm. A second charge loan will usually have a higher interest.
These are monthly interest rates, not annual interest rates. I.e. when you take out a bridging loan that charges 1% interest each month, it will be 12% for the year.
However, these aren't the only fees you need to take into account:
Product fees - also called an arrangement or facility fee. They cover the cost of organising your loan. This fee generally works out as a percentage of how much you borrow, typically between 2%. For example, if you borrow £100,000 with a product fee of 2%, you'll have to pay a fee of £2,000.
Broker fees - you could go direct to a lender, but specialist brokers, such as Tiger Financial, typically have access to deals that are unavailable to direct clients. They'll also negotiate on your behalf and deal with the more complex administration. Brokers fees can be a fixed cost or a percentage of how much you are looking to borrow. They are typically between 1-3%.
Deposit - just like mortgages, you will need to put down a deposit to purchase the property. The more money you can put down, the lower the interest rate on your loan will be. Most residential bridging loans require you to pay at least 25% of the property's value as a deposit. The bridge loan will cover the rest. It is possible to get a loan for 100% of a property's value, however you will typically be expected to have a second property to use as security.
Valuation and survey fees - again, just like a mortgage, your lender will require an inspection of the property to check it's worth what you need to borrow to pay for it. Because if you fail on your repayments, they'll need to be able to sell it themselves to recoup their costs. These fees vary - the more expensive the property, the higher the fee.
Drawdown fee - also known as an admin fee. Lenders charge this fee for you to access the loan. This fee will vary between lenders, but on average you're looking to pay £500.
Redemption fees - bridging loans are recorded as a charge against the property, and this feel is for removing the legal charge from your property. This is usually between £100-£150.
Early repayment fees - bridging loans are flexible with early repayments, and most lenders will let you pay off the loan early without needing to pay a penalty. However, some lenders will charge for early repayment, usually around 1% of the borrowed amount.
Solicitor's fees - as well as paying your own solicitor's fees, you will be expected to pay for the lender's solicitor's fee too, in relation to organising your loan.
Transfer fees - the final cost will be the bank charges incurred with transferring funds from the lender to your solicitors. This is usually £25.
Most of these fees are rolled into the cost of the loan, repayable at the end of the term, so you don't need to worry about paying them monthly.
The exception is valuation fees and legal fees which you will need to pay upfront.
For short term finance to bridge the gap in funding to buy a residential property at auction, to fund a new property investment, to pay for refurbishment works, or simply for cash flow reasons, get in touch with Tiger Financial today.
As one of the UK's leading specialist bridging loan brokers, we understand that you need access to funds quickly. Discover a range of finance options from high street banks to boutique family offices, and compare lenders in our database.
Get in touch today and secure finance quickly for your residential or buy to let property.
Tiger Financial Ltd is a financial services company registered in England and Wales no: 10225910.
Tiger Financial Ltd is directly authorised and regulated by the Financial Conduct Authority (FCA) no 915106.
The FCA does not regulate all mortgage, commercial mortgages or bridging loan and development products. Think carefully when you buy a property before securing debts or credit against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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