Bridging Loan Basics
A bridging loan is an interest-only, short-term loan secured on a property. Whether purchasing a buy-to-let property, assisting with an auction purchase, undertaking light to heavy refurbishment, or raising capital for business purposes, we can help.
The key consideration is how the loan will be repaid within a 3-to-18-month period by way of either property sale, refinance, or funds from another source. Bridging loans are designed to move a funding scenario from A to B rather than as a long-term funding solution.
An exit strategy is your ability to pay off the loan. A bridging loan can typically be redeemed in one of three ways:
- The sale of property
- Refinancing to a buy-to-Let mortgage or commercial term product
- Cash redemption from another source (i.e. alternative property sale)
The exit strategy is a vital part of any bridging loan application. It is having a strong exit strategy that makes the loan application process so fast and flexible and can be more important when applying than your credit history.
If a lender charges upfront legal undertakings, it basically means that the borrower will be charged with a non-refundable fee before the valuation takes place. Here at Hope Capital, we believe in transparency and doing all we can to support our borrowers, which is why any solicitor undertakings are taken from the loan on completion instead for loans up to £500k.
Bridging finance can be used for a multitude of reasons and is very advantageous when borrowers require flexibility and quick access to funds, including re-bridge, capital raising, auction purchases, light/medium/heavy refurbishment projects, development exit, finish and exit, change of use schemes and permitted development schemes.
The main difference between regulated and unregulated loans is that regulated loans are regulated by the Financial Conduct Authority (FCA), whereas unregulated loans are not. Regulated loans are those on a property you are living in or are going to live in, while unregulated loans are useful for corporate entities and for investors who hold properties that you aren’t going to live in (as a main home).
Any individual or limited company can apply for a bridging loan.
Title insurance ultimately provides protection to both buyers and lenders against potential risks and financial losses related to the title of a property. As a result, one of the main benefits of title insurance is the peace of mind it provides, helping to minimise the risk and deliver more certainty.
We offer full title insurance on residential property types up to £1m and other asset types up to £500k.