Bridging Loans

A bridging loan is a short-term loan used to help those looking for funding with a quick turnaround.
It can also be used when conventional financing is not available.

At R3 Mortgages we have access to the number of bridging loan providers all with different lending criteria and requirements. So why is that important? By having access to a large number of bridging loan providers, it provides you greater choice given your own personal requirements.

What is a Bridging Loan, and how does it work?

Bridging loans are short-term loans secured against property in order. At R3 Mortgages, we can arrange short-term loans from £50,000  for terms up to 12 months.

For example, you may be buying a new home and selling your existing one to finance the purchase. You’ve already made an offer on the new property, but unfortunately, the buyer of your current house withdrawn  meaning you are unable to complete your property purchase. In order to avoid losing the new home , you can use a bridging loan that is secured against your current property. If the bridging loan had a term of 12-month term,  this would mean that you would have up to 12 months to sell your current home and repay the bridging finance..

Compared to conventional mortgages , bridging loans can be much quicker to arrange. In addition, as the repayment is usually due to the sale or refinance of an existing property, they are not as income or credit history-dependent as a conventional mortgage.

Why choose a bridging loan:

  • Fast to arrange

  • Buy before you sell

  • Property restoration

  • Poor credit history

Why Use A Bridging Loan?

  • Auction

    Auction Purchases

    When you purchase a property at auction, you usually have a strict deadline for completion. Bridging finance enables investors and landlords to complete purchases quickly.

  • Property chain break

    Chain Break

    You may want to complete on the purchase of a property when the sale of another has fallen through. Bridging finance can be a solution when a property chain has fallen through.

  • Property refurbishment

    Refurbishment loans

    In case you are planning to renovate a property, a bridging loan could be used until the property can be financed or sold without locking yourself into a long-term loan agreement.

  • Downsizing

    Bridging loan enables homeowners to quickly downsize into a smaller property. Take complete control of your next purchase, without having to sell your property first.

  • Buying unmortgageable property

    If you fall for a property that is uninhabitable, or has certain structural issues, then you may be unable to arrange finance. Bridging loan is your only solution

 What are the different types of bridging loans?

Regulated Bridging Loans - This is where the security is intended to be used for residential purposes by the applicant or family member.

Non regulated Bridging Loans - This is for property investors and landlords

How to get the right bridging loan

There are many points to consider with bridging loan. These include:

  1. Do I really need a bridging loan? Are there alternative forms of financing that would help me achieve my objectives.

  2. How will the bridging loan be repaid i.e. how will you exit the bridging loan.By starting with the end in mind, you should consider :-

    • How will you pay the lender back?

    • Are your timescales realistic?

    • Is your solicitor experienced with bridging loans?

    • Have you factored in a contingency for unforeseen events & circumstances?

 To discuss your own personal bridging requirements, arrange a free initial, no obligation call with us today!

FAQs - Bridging Loan

  • It is usually faster to arrange a bridging loan than a conventional mortgage.

  • The length of the facility can vary depending on your requirements. They are usually arranged for 6-12 months.

  • There are many lenders in the bridging loan market with different criteria.

  • There are a number of fees & costs and these usually include:-

    Monthly interest - this usually depends on the loan to value

    Lender Arrangement fees - this is usually a percentage size (e.g 2%)

    Legals Fees - With bridging loans you are usually responsible for the bridging lender’s legal fees as well as your own.

    Valuation Fees - This is the cost of arranging a valuation on the given property. Some lenders may be able to use an automated or desktop valuation given the loan to value.

    Broker Fees - This is the fee charged by the broker for facilitating the loan.

  • The rate of interest depends of a number of factors. This include:-

    Loan to Value - the proportion of the property value you are looking to borrow against)

    Applicant profile - this relates to credit history, assets & liabilities if you are able to offer other property as security, etc)

    Lender - similar to the conventional mortgage market there are a number of lenders in the bridging finance with different terms.

  • Bridging Finance is usually repaid when:-

    On refinance - The subject property is refinanced with another lender on a term loan and the bridging lender is repaid.

    On sale - The asset is sold and the loan is repaid from the sale proceeds.

  • England, Scotland & Wales.

  • Yes. Depending on the terms, most lenders will allow you repay the facility before the end of the term. However, they may have a minimum period e.g. 30 days.

  • Limited companies and SPV can arrange bridging loans. They can also be utilised by SIPPS, LLPs, Trusts & offshore companies.

  • Most lenders will allow you to use your own solicitor. However, there may be the option to use the borrower’s solicitors. This is called dual representation.

  • Yes, subject to certain restrictions.

  • Yes.

  • A bridging loan broker will be an intermediary who has access to more than one bridging loan lender.

  • Yes, you can arrange a bridging loan for buy to let.

  • Yes. One of the main reasons that bridging loans are used are for auction purchases.

  • Development finance is usually used for property development. This has similar characteristics to a conventional bridging loan.

  • With bridging loans, you will usually need to cover the lender’s legal costs as well as your own. They may have a specific firm or use a panel to represent them. They may also offer dual representation where the solicitors act for both parties. If you are going to have your own legal representation it is important to determine if they regularly handle bridging loans where speed is essential as you are usually working to tight deadlines.

  • The term flipping a property usually refers to buying, renovating, and selling a property for a profit. Bridging loans can be used for these transactions.

  • A bridging loan is used as a form of short-term finance and will typically be repaid following the sale or refinance of the asset.

    A mortgage on the other hand is a long-term loan used to finance a property. Conventional mortgages are not arranged, designed, or priced to be used as short-term loans.