What is a bridging loan?
Acting as a ‘bridge’ while waiting for finance to become available, a bridging loan will often be used by an individual to secure a property investment as they await the sale of another property asset. Unlike mortgages, the process of securing fast bridging finance can be completed in a matter of days.
What can I use a bridging loan for?
Bridge finance is also particularly useful for people who are buying a property at auction, which typically requires the buyer to supply the funds for the purchase within 28 days. This means that an auction bridging loan is more efficient than a mortgage. Property investors will also use fast bridging loans to secure capital to refurbish properties before selling or leasing them.
Bridging loans can be used outside of property purchasing as well. For example, business leaders can use bridge finance for urgent business investment opportunities.
What are the key benefits of taking a bridging loan?
Auction bridging is very useful as it means people who buy a property at auction can pay for the asset within the short timeframes auction houses usually impose. Meanwhile, commercial bridging loans and bridging for refurbishment deliver capital to other areas of the real estate sector so a broad range of investors and developers can pursue opportunities on the market.
By using a bridging loan, an individual has the ability to raise more capital by securing the debt against any existing property assets in their portfolio. Furthermore, they benefit from the fact that they borrow against the value of the property, not the purchase price.
How can MFS help?
Our team of experienced underwriters deal with each bridge loan enquiry we receive on a case-by-case basis, which means we can provide the best possible bridging loan to our clients.
MFS provides auction bridging, bridging for refurbishment, bridging for buying a property, commercial bridging loans, buy-to-let bridging and much more.
You can use our bridging loan calculator to find out how fast bridging finance could work in your particular circumstances.
How long does it take to obtain a bridging loan?
Every enquiry for a bridge loan must be assessed on its own merits, but speed is always of paramount importance.
What is the difference between commercial bridging and residential bridging?
Commercial bridging loans are used to purchase or renovate real estate that is used for business purposes. For example, commercial bridging loans can be issued for the acquisition of a shop, restaurant or warehouse, to name just a few potential uses.
Residential bridging, on the other hand, refers to bridging loans that are used to purchase houses and flats. Within this there are auction bridging loans and buy-to-let bridging loans, among many others.
What is the difference between first and second charge loans?
When it comes to bridging finance, it is easier to secure more money for a first charge loan as the lender knows they are the priority when it comes to recovering funds. Meanwhile, as a result, a second charge bridging loan will carry greater risk. Therefore, the rates between a first and second charge loans usually vary.
What is KYC (Know Your Customer)?
KYC is a vital part of a bridging lender’s due diligence process as it ensures money is only lent to suitable clients.
What information is required for a bridging loan?
Bridging finance is most often secured against a property asset – as such, information about the property being used as a security will need to be provided.
In other instances, bridging loans can occasionally be secured against other assets, such as cars, jewellery, antiques and artwork. In which case, detailed information about these assets must be made available with valuation.
What is the role of the broker and how can a professional broker help a borrower?
In the bridging loans industry, brokers act on behalf of a borrower to source loan options and competitive rates. At MFS we work with brokers/Intermediaries and directly with private clients.
Do I need a solicitor?
As with any property purchase or significant financial transaction, having legal support is extremely important. Using solicitors who have a good understanding of the bridging finance industry can help ensure the transaction proceeds efficiently and that the borrower is fully aware of what is involved in this process.
How can you repay a bridging loan?
Usually, the bridging loan will be repaid, inclusive of the interest accrued, by an agreed date – typically following the sale of the borrower’s existing property asset. It is important, therefore, that the borrower factors in potential delays to the sale of an asset when agreeing the exit terms of the bridging loan.
It is also imperative that the borrower establishes whether the lender will charge if they wish to repay their bridge loan prior to the agreed exit date.