Bridging loans are generally described as fast mortgage offers to solve short term liquidity problems. There are more and more bridging lenders in the market. Many of these lenders are backed by homogenous funding lines or fragmented capital pools, each with rigid lending criteria. The result is that bridging finance firms often cannot release capital quickly enough to be useful in situations that call for a bridging loan in the first place.
There are also other barriers. Regulations, emotions, time pressures, competing advisers and other moving parts can influence how quickly you can get a bridging loan. When it comes to achieving the outcome you want in the time you have available, securing a bridging loan is a real skill and art.
We help our clients to secure bridging loans. Here's what we do to give your bridging loan application the best possible chances of success in tight timeframes:
If you need a fast bridging loan, you need to work with people you can count on. Approaching a firm you already know, understanding how the business works and the lender's processes can smoothen the bridging finance process immensely. If you know what the firm will ask for, the order things are done in, and where the pressure points are, you are more likely to get the outcome - and capital - you want.
Taking a chance on a new lender can be the fatal blow to your deal: you don't know what you don't know. What does that mean? If you are in the dark about the lender's process, if you make a false step, or you have to start the process again, you can lose valuable time. You also risk the lender turning down your bridging finance application.
At Enness, we always give you two bridging finance options. One offer will be the price for completion next week. The other will be the price for completion the week after.
You'll find that the cost for completion the week after next is often the lower of the two offers, but you need to consider the whole picture. You may be offered lower rates to close the week after next, but you will risk losing the deal in the meantime. You may choose to opt for the higher offer (completion next week) in return for the certainty of receiving the funds in time - a lot of our clients take this path.
Bridging finance is a balancing act and depends on the deal dynamics and what's at stake. You should fully evaluate all the factors that make up the offer, not only the monthly interest rate in isolation.
Bridging loans are underwritten by underwriters. Although there may be fewer hurdles to jump than for other types of loan, your lender will make a decision based on your profile and the property.
You'll want to submit any paperwork the lender requests as quickly as possible. Paperwork, forms and data should be completed as fully as possible – don’t be tempted to skim sections or details. If you need to get documents certified, get them certified. If you need to sign a form, do it quickly and get it back to the lender as soon as possible. We have never seen a lender offer bridging finance without a document they have specifically requested. Your best chance of being approved for a loan is to send, submit and sign everything that's requested of you, in the minimum timeframe.
Bridging loans are secured against property. The amount you can borrow is based on the property's value and the loan-to-value ratio the lender agrees to offer you.
If you need to move fast, you must research the property's value and give a clear and honest value expectation to the lender when you first discuss your case. Remember that a professional valuation will be carried out on the property by a surveyor acting for the lender. There is no benefit to the surveyor in valuing the property higher than it actually is, and there is more than enough information available on which to base a valuation decision. Your lender will always find out the actual valuation of the property, so being upfront with them from the start of the process will help, not hinder you.
If you wish, you can prepare a pack of information to help the surveyor come to a decision. Comparable local plans to develop or receipts for what has been spent will help the process.
However, if the property is worth £1m, you need to borrow £700k, but the lender will only offer 65% loan-to-value, don't put the valuation in for £1.1m and hope no one will notice - they will. Find a lender who will lend what you need based on the actual valuation of the property.
The biggest secret to arranging a fast bridging loan is to get the best possible legal team to help you. To do that, you will also need to be prepared to pay for the best.
The right solicitor will get the right deal. The wrong solicitor will choke a deal to death then hide the corpse in their basement!
In all seriousness, you will want a legal team who:
We have never seen a client regret paying for a fantastic legal team with the capability, understanding and motivation to get the deal done. We have, however, seen clients regret going for a cheaper legal team that couldn't - or wouldn't - deliver.
Communication is key to a fast bridging loan completion. You will want someone to take control of the transaction, be at the heart of the deal, make sure everyone is aware of what's needed, what the timelines are, what the next steps are, and that everyone is fighting for a common goal.
A first meeting to set a timeline and expectations often does the trick, followed by regular updates. Enness always operates in this way, setting up the initial meeting, getting - and then keeping - the ball rolling. You will also want a partner who can courteously highlight weak links or potential issues. In the bridging loan market, it is common for otherwise strong deals to fall apart because a problem wasn't addressed or an ego in the professional team ran wild without being checked. You will want a neutral partner who can point these issues out to you, provide advice, underline obligations and regroup the team.
You will inevitably encounter problems in the bridging loan process; after all, an unexpected challenge has probably put you in the position of needing a bridging loan in the first place. Solving any issues proactively and quickly is vital. Research insurance, valuer access, independent legal advice – the problems that come up are often the same and can be avoided with careful preplanning. If something unpredictable does come up, it isn't automatically game over. The key will be keeping a cool head and stamping out the issue fast – get advice, discuss it, mitigate it or get around it.
Having a team on your side who has experience in the bridging finance world, has a proven track record, and can guide you through any pitfalls is vital to your success.
We have seen it all, and we know how to help you navigate challenges or problems you are likely to encounter when trying to secure a fast bridging loan. Reach out to a member of our team to chat about your needs or requirements.