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What Is a Bridging Loan?

Bridging finance is a type of short-term mortgage secured against your property. Investment property, buy-to-let property, a trophy home or holiday home can be used as security for this type of loan.

Bridging loans can last from a week to three years. They are most commonly used in the UK if you want to buy a new home before your current home as sold, and to break property chains. However, they can also be a mechanism to release equity from your home quickly before refinancing with another lender, or to purchase property at auction where there is usually a very tight deadline to settle funds.

Bridging loans can also be used to buy a new home before your current property sells, renovate a property before you put it up for sale or upsize or downsize without going through a lengthy mortgage process. There’s practically no limit to how this type of financing can be used.

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Auction Finance

Involving Enness well before the auction will make this kind of property purchase as easy and straightforward as possible. Armed with this information, you’ll be well-positioned to make the right bid, based on what you know you can borrow and what you can afford.

Short Term Loans

Bridging finance can be an excellent vehicle for very short-term finance. Short-term bridging loans can be complex to arrange, so this type of finance tends to be an option when you need to borrow significant capital, even if it’s for a very short period. Read more about our short term loans here

Residential Bridging Loans

Bridging loans can be used in lots of different scenarios related to the sale and purchase of residential property. Residential bridging loans are exceptionally flexible and there are very few limits on how you can use this type of loan, provided a few basics are in order.

Large Bridging Loans

Just because you need a large loan, that doesn’t mean you’ll have to endure a lengthier transaction: Enness will be able to secure offers for large bridging loans as quickly as possible and always within the timeframe you need.

International Bridging Loans

From negotiating a deal for you to helping you plan for elements like foreign exchange risk and where to seek legal advice, Enness will be with you at every step of the way to ensure your transaction is swift, easy and hassle-free.

Enness' Offer

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Enness’ Offer

  • Get a fast bridging loan offer within 24 hours
  • Use any type of property as security
  • Enjoy competitive interest rates from 0.75% to 1.1% per month 
  • No minimum term
  • Use bridging finance for UK or international property
  • Access regulated and unregulated bridging loan finance lenders
  • Cheap bridging loans available

Is Bridging Finance For You?

Bridging loans are a mainstream and cost-effective financing method. Bridging finance is fast to arrange and these loans are always individually negotiated. As a result, Enness will be able to broker a loan that’s tailored to you and your situation.

Sometimes marketed as the ultimate problem solver and opportunity creator, bridging finance is often used in situations where you’re against the clock or temporarily short of capital. It can also be employed when traditional lenders can’t (or won’t) lend for a variety of reasons.

Some borrowers can be hesitant about bridging finance – it can be seen as something of a risky product. This usually stems from uncertainty about how or when to use it. The general rule of thumb: bridging is a finance vehicle that should only be used when there is a specific reason for doing so, and it makes sense to use this type of loan. There are many cases where it can be a perfect-fit solution – particularly for high-net-worth individuals who have significant net worth.

It can also be seen somewhat negatively due to it being more expensive than a finance product like a mortgage, and because there is a risk involved in needing to repay your loan by a certain date. The reality is that bridging finance is not inherently ‘riskier’ than any other type of finance. It simply needs to be used in the right circumstances. The most important elements of bridging loan finance are a good exit strategy and a clear plan on how you will manage the loan.

Bridging finance is a convenient and practical way to borrow money quickly. In many cases, it will allow you to make purchases or pursue plans that would otherwise be out of reach. The comparative cost of bridging loan finance is very often balanced by what you would lose out on if you don’t have the capital available to follow an opportunity, if you can’t purchase a property, break a property chain, release equity and so on.  

Just like with any kind of loan, it is important to get specialist advice to ensure it is the best option for you. Likewise, it is important you find a deal tailored to your circumstances, especially if you are planning to borrow £1 million or more. Much of the potential risk involved in bridging finance can be removed by ensuring you have a solid plan in place for how you’ll use and repay the loan.

Enness will talk you through all your options and will only suggest bridging finance if it is a feasible and workable avenue for you. The team will ensure you understand everything about how this type of finance works and any risks, as well as helping you understand the benefits of this type of finance, so you can make an informed decision if this finance is for you.

Working exclusively on your side, Enness will get you the best deal, terms and remove stress from what can otherwise be complex transactions. Available to you 24/7 to answer questions, provide assistance and support throughout your transaction, Enness will save you time, money and unnecessary hassle.

Understanding Bridging Loans

Bridging loans are very flexible financing solutions, but like any other type of financing product, there are advantages and disadvantages. It’s important that you understand these so you can decide if bridging finance is the right option for you.

Bridging loans are generally used in specific circumstances, to break a property chain or to be able to purchase a home you can’t get a mortgage on, for example. Alternatively, this type of loan can be used to release equity against a property quickly, so you can pursue an opportunity or make an investment of some kind.

There always needs to be a good reason for using bridging loan finance rather than an alternative type of loan. When applying for bridging finance, lenders will still want to see a plan of action, including solid reasoning as to why you need this type of finance and how you will use the money.

Enness can advise you as to whether bridging finance is the right option for you or otherwise explore alternative finance options that may be a better fit for your situation and needs. Enness will never suggest you use bridging loan finance if it isn’t the right course of action for you.

Disadvantages of Bridging Loan Finance

Price

Compared to more conventional loans like a mortgage, bridging loans can be more expensive in comparison. With bridging loan finance, you will be borrowing a significant sum of money over a relatively short period of time and for a very specific reason, for example to solve a problem, create liquidity quickly or pursue an opportunity. Bridging loans are most commonly used when it’s not possible to use other types of finance and therefore there is a premium to pay for this service. When a bridging loan is used, there is usually a little more risk to the lender and there are also many more aspects for them organise in a very short time, such as approving you for the loan and onboarding you. This is why this type of finance tends to be more expensive than other types of loan.

However, it’s important to understand what ‘expensive’ can mean in the wider context of what you are trying to achieve. Bridging loans cost more than many types of conventional loan, but they will sometimes be the only type of lending you will be able to secure. You may want to break a property chain, create liquidity, buy a new property or generate capital to solve a problem. Bridging is an incredibly flexible type of finance that opens doors for borrowers, and, in many cases, may be the only route to borrowing or creating the liquidity you need. Often, it it worth paying this premium.

Fees

Bridging finance also typically comes with more fees than conventional types of loan including legal fees, lender fees, valuations, arrangement fees and other costs. Enness can provide you with information on all of the fees you are liable to pay if you take out a bridging loan, and what these are likely to amount to, so that you can get an idea of total costs in addition to rates.

Risk

When considering borrowers, lenders will look at your plans for repayment and any revenue (salary or otherwise) you have coming in. This will contribute to how confidently they can lend to you. For example, you may be in the process of selling a property or expecting a large settlement or inheritance which will dramatically (and positively) impact your net worth. Often, the liquidity event itself is of less importance to lenders than when you will receive it and how certain it is that you will receive it by a specific date. The more certain you and your lender is about how easily you can repay the loan, the easier it will be to secure finance.

Just as with any loan, bridging finance comes with its own risks. If you don’t repay the loan, you stand to lose your property. Having a secure repayment plan in place and being able to prove you can pay back the loan is imperative.

Advantages

Speed

The process of getting a mortgage or other types of lending can take at least several weeks and sometimes, months to complete. Lenders will need to review your application, approve you for a loan, onboard you and ensure you meet the necessary regulatory and compliance rules that will allow them to lend. In general, this process can take a least 6-8 weeks, however it may be longer if your circumstances are more complicated.  

Bridging lenders will meet the same regulations (ensuring you meet compliance, AML, credit and onboarding requirements) but despite this, the process moves much faster. As a result, getting a bridging loan is much faster than completing a mortgage, which is essential if you require finance quickly.

Privacy

Not all bridging finance is regulated, and there are lots of smaller, nimble lenders operating in the space. This will speed up how quickly you can secure the loan and there will be a greater degree of privacy – lenders are more focused on the deal, exit and security in question than all the details of your financial background.

Flexibility

Generally, bridging finance lenders are smaller and more flexible than larger lenders that operate in the mainstream lending space. This means decisions are taken quickly and it is easier to get in front of decision makers. Enness usually has personal and close relationships with these lenders. Your broker will be able to build a loan with lenders based on your financial background and scenario. There is more flexibility, lenders make decisions quickly and deals reach completion very fast.

Rates

Generally speaking, bridging lenders are non-bank lenders, and they are responsible for setting their own rates and fees. While this seems obvious, it can be useful for borrowers because it means bridging lenders are less influenced by increases to the base rate.

Typically, for example, banks pass on interest rate increases directly to borrowers who have a flexible rate – this can happen as soon as a day after the Central Bank raises the rate. Bridging works differently. Lenders will fix rates up front, which means that potential base rate increases during the duration of your loan will not change what you are liable to pay.

Large Loans

You can borrow a significant amount using a bridging loan. Most lenders can lend around £2-5 million (LTV of about 70-75% is usual in a straightforward deal, provided your finances are in good order and you have a significant net worth). However, other lenders will offer significantly more – bridging loans of £10 million plus are becoming more common.

Lenders that operate at the top of the market are usually specialists in large loans, and most are set up to lend large amounts. Often, it will be possible to secure a large bridge loan against a single, amounts against a single high-value property. 

Ease

Some borrowers will decide to opt for bridging finance when they want to secure a loan quickly with as little hassle as possible. Applying for a loan will always require oganisation and an investment of time, but bridging finance is, often, simply faster and less complicated to arrange than other types of finance, like a mortgage. This is because lenders are principally focused on your exit and the asset. As long as you are creditworthy and can demonstrate you have a good plan of action and plan for paying back the loan, bridging can be a less burdensome type of finance to arrange than alternative financing products, which take longer to arrange and require more paperwork and information. Many borrowers, particularly high-net-worth individuals, will happily pay a premium to benefit from lending that is more pragmatic and can be closed as quickly as possible.

How Much Can I Borrow Using a Bridging Loan?

As bridging finance has become more mainstream, more lenders have moved into the high-value and large loan space. You will find that the current market has lenders that offer very considerable loans.

Ultimately, how much you can borrow will depend on the property you use as security and your plans for repayment. In general, around 70-75% LTV is the maximum lenders will offer; however some players may be able to offer a little more. Some lenders offer considerably less than this, depending on your background, the property and other elements of the deal. The more complex the loan, or the more risk there is for lenders, the less you will be able to borrow. To secure the best LTV possible, having solid plans in place for using and repaying the loan, as well as having a good financial background is paramount. The stronger your overall financial position, the more you are likely to be able to borrow.

Certain lenders may offer multi-asset lending. This means that, for example, you could secure a loan against two houses in your portfolio, which can maximise what you are able to borrow.

Using Bridging Loans

Bridging finance originated as a way to enable sellers to fund a new property purchase before they had sold their current property, usually their main residence – literally ‘bridging the gap’.

Over time, both lenders and borrowers realised how much flexibility bridging finance offers. While bridging finance is still used to fund the purchase of a new house before a property has sold, it is also regularly used in other scenarios. The most common of these is equity release.

In this scenario, a lender will secure a short-term loan against the equity in your property. You can use equity release in various situations. For example, you may want to use equity release for investing purposes, such as buying shares, purchasing a company, or expanding a current company. It can also be used for buying a new property or consolidating debt. Equity release has a whole range of uses which makes it valuable for borrowers in situations where you need capital quickly.

How to Secure a Bridging Loan

Broadly speaking, there are two ways to go about securing a bridging loan:

You can approach lenders directly by yourself in the same way you can approach lenders if you want to get a mortgage. If your situation is straightforward or you are not intending to borrow a significant amount this can be a good option. Approaching lenders directly can be a good option if you have a relatively ‘plain vanilla’ scenario and you can benefit from an off-the-shelf bridging finance package.

Alternatively, you can go through a trusted broker such as Enness. This option is best if you need to borrow a significant amount of money, if you have a non-standard scenario (you want to use structures, you are a non-UK resident or international borrower), the property is held in an unusual way and so on. Working with a broker is often the best path forward if you need a high-value bridging loan or if you want to secure finance on an international property. Most lenders will regard this as a non-standard scenario, and may not be able to offer finance. Enness is used to working in high-value, international and unusual deals and knows which lenders will offer the most competitive package.

Many large lenders have pre-packaged one-size-fits-all products which may not work for your situation, therefore using a broker is also the best option if you need a more tailored loan for any reason. You may need a bespoke loan if, for example, you want to repay the loan through ‘unusual’ means such as though a divorce settlement, sale of a business, and so on.

Bridging Loan Interest Rates

Bridging loans are often structured so that the interest rate is a percentage of the loan amount, calculated on a monthly basis. For example, 0.45%, 1% or 2% per month.

There are three ways to pay the interest rate:

Retained Interest

Your interest payments are deducted from the gross loan amount and are used to meet the interest costs as they accrue - i.e. you pre-pay the interest on the loan.

Rolled Up Interest

Instead of paying a monthly interest payment, interest is added to the outstanding capital (calculated on a monthly basis), and you pay it all back when the loan is repaid.

Serviced Interest

You will need to meet the interest cost monthly as you would with a traditional mortgage

How you pay interest will affect the total cost of your loan, your cash flow and how much you will be able to borrow. Depending on your situation, Enness will talk you through what kind of interest structure will work best for you and will seek out your preferred option from lenders to ensure you are in the best possible position.

Paying Back A Bridging Loan

Bridging loans are short-term financing products. Therefore, the way you repay them is slightly different to how you would repay something such as a mortgage, which is usually repaid over many years.

Bridging loans can last for a few days or months up until a maximum of around 36 months. Because they are so short, lenders will want to understand how you plan to repay the loan. With long-term lending, you pay back the capital over time, but this is not the case with bridging loans, where the capital is due as a lump sum. Being required to pay a significant amount of money back to lenders means they will need solid information on how you plan to do this. It’s important that you can present a feasible exit plan that gives lenders confidence.

There are plenty of options for paying back a bridging loan – this process is also called your exit. These will include:

Refinancing

Refinancing is one of the most common ways of repaying a bridging loan. With refinancing, you will take out another loan from a new lender. Your new lender will repay your bridging loan. Usually, you will refinance to a longer-term lending product, such as a mortgage or alternative type of loan with a term of several years. These longer-term and more conventional lending products will usually have lower interest rates than bridging finance, which tends to be more expensive because of the flexibility it offers and how short the borrowing term is.   

Property sale

You can also exit a bridging loan by selling the property the loan is secured against. Here, you will use the proceeds of the sale to repay your bridging loan. As you may not be totally sure when this will be – for example, your property might sell in 3 months or 6 months, you will usually agree on an open bridging loan, which gives you flexibility on when you can repay the loan up to a certain point.

Sale of Assets / Liquidity Events

In this situation, you will use capital from another source to repay your bridging loan in a lump sum. There’s no specific way this needs to happen. You might raise capital via the sale of another property in your portfolio, sell assets or shares or receive a payout from the sale of a business, although this list is not exhaustive.

If you take this route, the liquidity event itself (e.g., expected inheritance, sale of a business) is less important than the how and the when. Lenders will want to make sure you have enough capital to repay the loan at the moment when you need to pay back the loan.

Enness works lenders across the market and will take the time to understand you, your plans and your financial situation. Your bridging finance broker will explain your options in more detail and help deliver the plan that is best for you. However you want to repay the loan capital, remember that this type of borrowing is a short-term financing solution. If you need a longer-term loan, it may be helpful if Enness helps you arrange and negotiate your refinance at the same time as arranging your bridging finance.

Why Enness For Bridging Loans?

Navigating the bridging loan marketplace alone is undeniably challenging, especially if it's the first time you’ve used this type of finance. There are hundreds of lenders, but many will offer you a generic bridging finance deal that’s only partially tailored to your needs if you approach them directly. You’ll also find you’re likely to pay significantly more interest if you take this route.

Staying on top of all the players involved in the transaction when the deal is underway is extremely strenuous if you’re operating alone. Enness will get involved in the transaction and keep all parties on schedule, to keep your goal on track without any hiccups. You’ll save a significant amount of time and won’t need to be constantly handling the often tedious but hugely important parts of the deal – Enness will keep you informed at every step of the way while shouldering the workload for you.

Enness will go straight to the source to get you the best rate and terms that meet all of your requirements. From your first conversation with Enness all the way through to drawdown, your bridging finace broker will be alongside you, answering questions, keeping your plan on track and working tirelessly to get you the results you need.

Bridging Finance For Auction Purchases

Auctions are ideal places to pick up property bargains or buy undervalued property. Bidding happens quickly, but don’t be deceived by the speed things move at: to be in the best position, you’ll have laid the groundwork for auction finance well before the hammer comes down.

If you are planning to buy a property at auction, auction finance is the perfect alternative to buying in cash. Auction finance will allow you to get access to capital quickly, which is useful if you want to snap up an investment property. These loans are also a great solution if you fall in love with a property that’s being auctioned, and you want to buy it despite your capital being tied up in other real estate and assets.

Generally, at auctions, you’ll need to have cash available to put down for the deposit on the day of the auction and have funds available to buy your property within the following three weeks.

Involving Enness well before the auction will make this kind of property purchase as easy and straightforward as possible. Your bridging finance broker will start by getting you an in-principle bridging finance agreement ahead of the auction. Armed with this information, you’ll be well-positioned to make the right bid, based on what you know you can borrow and what you can afford.

Auction finance will usually be readily available to you regardless of whether you are a seasoned or first-time developer. Whatever your experience, Enness will be able to negotiate an attractive package tailored to you. Lenders typically require more collateral for first-time developers, so you’ll want to bear this in mind if you haven’t bought at auction or developed a property before.

Auctions can be exciting, particularly if it’s your first time bidding, it’s easy to get swept up in plans and ideas. Always on your side, Enness will also act as a sounding board, listening to your ambitions, goals and hopes for your future property. Your broker will help you understand what kind of auction finance you can expect and you’ll be able to make sure what you can borrow matches your plans for the property. This way, you can decide if you need to reign your plans in a little or find out if you have the financial flexibility to do a little bit more.

Bridging Finance For Property Development

Bridging finance is commonly used when you need capital in order to build or redevelop a property. For example, you may need credit to build or develop a property for commercial use. Alternatively, you might want to construct or renovate your own home or an investment property. You can also use a bridging loan if you have borrowed capital from several lenders to fund work on a property you have already started developing and later plan to sell. In this case, you can pay off multiple lenders and effectively centralise your borrowing, making it easier to manage. Bridging finance for property development is known for being particularly flexible, and the scenarios in which it can be used are very broad.

International Bridging Finance

Bridging finance originated in the UK, and it’s here that bridging is most common. If you are buying a property in the UK and the property you want to secure bridging finance against is also in the UK, you will have the most options and flexibility.

That said, options do exist if you want to purchase property in other countries, or if you want to secure a bridging loan on an international property or transaction.

UK lenders want to retain their highly competitive position in the international bridging market. As a result, you will find it is relatively straightforward to borrow as a foreign national, secure a bridging loan against an international property or use bridging finance in order to buy abroad.

There are bridging lenders outside the UK, although there tends to be far less choice, especially at the top end of the market. Your circumstances and the location of the property you want to secure the loan against will also influence how much, and sometimes if, a lender will let you borrow.

Regulations and rules surrounding bridging loans vary internationally, and you’ll need to bear in mind that what is usual in the UK may well be different elsewhere. The Enness team will work carefully alongside you to help you understand what you’ll need to consider if you’re not based in the UK, or if you want a bridging loan for an international property.

From negotiating a deal for you to helping you plan for elements like foreign exchange risk and where to seek legal advice, Enness will be with you every step of the way to ensure your transaction is swift, easy and hassle-free.

Most lenders are comfortable lending to first-time property developers, although the more experience you have, the more options will be available to you. If you are less experienced, lenders will certainly consider you, but are unlikely to offer as high a loan-to-value ratio as will be available to more practiced developers.

These loans are always negotiated on a case-by-case basis. Whatever kind of project you need property finance for, expect lenders to carefully examine at your plans, such as whether you plant to sell or rent the property, or if it will be your primary or secondary residence. They will also consider the development costs, location and total value of the property.

Enness has access to all the leading lenders in this specialist area of the market. Enness will also be able to help if you need a financing solution to a cashflow or capital problem that’s arisen during your development.

Your bridging finance broker will ensure you have the funds you need, when you need them and be able to secure you the best deal available on the market.

Large Bridging Loans

The UK’s bridging market is highly competitive, and for anyone needing a straightforward and relatively affordable loan, there is an abundance of lenders to choose from.

If your circumstances are more complex, or if you need a large bridging loan (£3 million or above), you’ll find it hard to get the best deal by approaching lenders directly. This type of loan is fast-moving, complex and lots of different parts need to come together at the same time, which can be magnified exponentially for large loans. 

There are fewer lenders in this specialist part of the market, but Enness will be invaluable in getting you the most competitive offer and maximum flexibility. Your bridging finance broker will handle negotiations and ensure your loan is tailored to your situation and meets all of your needs. Once secured, they will keep the deal on track and work with the other parties involved, such as your legal team, the surveyor and your lender, to see the transaction through to completion without any disruptions.

Just because you need a large loan, it doesn’t mean you’ll have to endure a lengthier transaction. Enness will be able to secure offers for large bridging loans as quickly as possible and always within the timeframe you need.

Regulated and Unregulated Bridging Loans

Regulated bridging loans are secured against a property in which you have previously resided, currently live in, or will live in in the future. If you have a property that a family member resides in or will live in in the future, this will also be viewed as a regulated loan.

Regulated bridging loans are overseen by the FCA and as a result, there are rules around affordability. This means that the lender will assess how you will pay the monthly loan repayments. To do this, they will look at your income streams and ensure there is enough of a margin that you can comfortably afford to meet the loan repayment schedule.

Unregulated bridging loans are secured against every other property type, or properties for other uses. Buy-to-let properties, property developments and commercial property, among others, will fall into this category.

Enness covers both sides of the market, and your broker will help you secure whichever type of loan you need regardless of how simple or complex your circumstances, how quickly you need the finance or for what purpose. Enness has access to the largest number of lenders and regularly secures bridging finance for borrowers in all situations, meaning you can rest assured the process of applying, securing and finalising your bridging loan will go as smoothly as possible for all parties. 

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Open And Closed Bridging Finance

Open and closed bridging finance refers to when and how you will pay back your bridging loan.

If you have a clear plan on how you will pay back your bridging loan (i.e., you know you will have capital by certain date, and you’ll use it to pay back the lender) this is a closed bridging loan. Typically, you’ll have a closed bridging loan if you need funds to tide you over until you receive capital that will come to you at a future date - a bonus, the sale of assets or inheritance being paid out, for example.

An open bridging loan is used if you are less sure of when you will receive the funds to pay back what you’ve borrowed. Typically, this will be when you are waiting on the completion of a property sale to be able to pay back your lender, or a similar scenario.

Regardless of whether you will opt for an open or closed deal, it’s critical to have a solid plan in place for the exit of your loan. First and foremost, lenders will want to know exactly how you plan to pay back the loan, but it will also be important for your own peace of mind and feeling secure with your options and choices.

Enness will help you understand the risks and advantages of open and closed bridging loans. Your bridging finance broker will help you pull together a game plan for your exit and present it to the lender in the most compelling way.

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Bridging Finance Guide

Bridging finance comes in many shapes and forms. You can take advantage of bridging finance if: 

  • You have complex or low income 
  • A significant portion of your wealth is tied up in assets like property 
  • You know banks and mainstream lenders won’t want to lend for the project you want to explore 
  • You have an ambitious project and aggressive plans 
  • The opportunity you wish to pursue requires significant borrowing 

The relatively short-term nature of bridging finance can be challenging, requiring experience, contacts and negotiating skills to secure the best possible terms with as much flexibility as possible. Extremely competitive interest rates, staged funding release to save on interest and utilising assets and income as security are vital elements of bridging finance deals. 

We excel in these areas as well as pre-arranging cheaper traditional refinancing of bridging loans at the end of the term.