Bridging finance is one of the most flexible types of finance available. It is also one of the fastest ways to raise very significant capital: bridging loans can be completed in just a few weeks, and you can draw down funds in the same timeframe. Lenders are open to offering these loans for almost any reason, provided you have a good use case for borrowing. The type of security you put forward is also flexible regarding real estate, meaning you can use an investment property, buy-to-let property, a trophy home or a holiday home as collateral for this type of loan.
Bridging finance is a type of secured loan collateralised against a property. Lenders are flexible in how these loans can be used, particularly if you are a high-net-worth individual with a portfolio property in the UK or abroad. You can use a bridging loan to release equity tied up in your property (or properties) to create a pool of capital, allowing you to react quickly and take advantage of time-sensitive opportunities or solve problems. Because you can draw down capital quickly – often in just a few weeks, bridging finance is ideal if you need to:
Ultimately, there are an almost infinite number of reasons why you might want to consider releasing equity from your home via a bridging loan, and lenders will be open to all reasonable scenarios – even if they look very different from the above. The flexibility offered with regard to how loan capital can be used is one of the main benefits of this type of loan. It also makes bridging finance very useful to high-net-worth individuals, particularly as you will often have unusual requirements for capital, which mainstream lenders can’t consider or complete in the timeframe you need.
Bridging lenders are increasingly taking a holistic approach to underwriting. Many lenders have flexible lending criteria, especially for unregulated bridging loans (a bridge loan secured against a property that is not your primary residence). This is especially useful if you are a high-net-worth individual, as you may have a property portfolio. As a result, provided the loan is affordable, you can demonstrate a solid rationale for taking out a loan, have a plan of how you will manage the funds and have a solid exit, most lenders can consider offering you finance. This includes scenarios where you:
As well as releasing equity from property you own in the UK, you can also use bridging loans to release equity from prime property you own abroad, using a holiday home, international buy-to-let property or trophy home as security. Several bridging lenders offer high-value equity release collateralised against property in Europe, the Americas, and the Caribbean as well as further afield, provided the property’s value supports lending, and it is in an established and liquid market. You can use international equity release to create liquidity for onward purchases, buy other assets, invest, pay off debts or liabilities, add value to your property by renovating or improving it, or for other purposes.
The lenders that offer international bridging loans are used to working with individuals and families from around the world. Provided you meet AML and compliance requirements, lenders are open to working with any borrower nationality. Again, you can release significant release equity from a property in just a few weeks. Because you will usually own international property via a structure rather than your own name, bridging lenders that offer international equity release can easily cater to these requirements.
You can use bridging finance to complete property transactions quickly without raising the finance you need via a mortgage or conventional property finance. This is helpful if you want to complete a property transaction as fast as possible, if you have an opportunity to purchase undervalued property and want a competitive edge to do so, or if you want to complete an international property purchase at pace – finalising the sale of holiday home before the summer, for example. Bridging finance is also advantageous if you’re a non-resident buying your first property in a country and don’t have a local credit footprint. Bridging loans can be arranged much faster than mortgages, and lenders don’t typically need borrowers to meet the same lending criteria as banks do, which makes the process more streamlined.
Raising capital to finance certain assets, fund ambitious investments, or to create the liquidity needed to solve problems can be challenging via mainstream lenders. Many banks and high street lenders tend to prefer very plain vanilla lending scenarios and offer products – like mortgages – that fit specific situations.
Bridging finance can be an ideal alternative to conventional loans if you have an unusual financing requirement where:
Provided you have a good reason for lending, a solid exit and a plan of how you will manage funds, bridging lenders usually have a more flexible approach to how and where loan capital is deployed, less rigid lending criteria, and a more holistic approach to assessing borrowers’ suitability for finance. In many cases, bridging lenders can offer finance where banks and other mainstream lenders can’t.
While arranging a bridging loan against unencumbered property tends to be the most prevalent type of bridge, we can also arrange second-charge bridge loans. These loans allow you to raise capital against the equity you have built up in your property, even if you have a mortgage, which is the first charge on the property. The second charge bridge loan is secured against the equity you have built up in the property.
Just as with standard bridging loans, you can use second-charge bridge loans for a variety of purposes, but lenders may want additional security, offer lower LTV, or they may restrict the types of scenarios you can borrow in. For example, second-charge bridge loans for renovation or refurbishment to add value to a property are relatively common. Large second-charge bridge loans for other purposes are available. However, any second-charge bridge loan will require specialist negotiation, structuring and a careful presentation of the facts to lenders by a broker to ensure you can access the capital, especially if you are looking to borrow a significant amount.
Bridging loan lenders operate in every part of the market, offering loans of a few thousand pounds up to multi-million-pound deals. Enness specialises in arranging bridging loans of £1 million or more, and we can broker very significant deals of more than £10 million, either against a single property or, in some cases, a single loan collateralised against multiple properties in your portfolio, be these in the UK or abroad.
Ultimately, the amount of equity you can release from a property will depend on how much your property is worth, but your exit and what you want to use the finance for will also affect how much you can borrow. A more ambitious deployment of funds or an unusual financing request will typically command a lower loan-to-value ratio (LTV) than a very low-risk scenario with a straightforward exit, for example.
Financing options available to you will depend on your requirements and circumstances at the time. Any changes in your circumstances, any known likely changes, or omissions in the information you provide can affect the suitability of the options available to you. These should be communicated to us as early as possible.
If you are considering securing debts against your main home, such as for debt consolidation purposes, please think carefully about this and consider all other options available to you.
Your home may be repossessed if you do not keep us repayments on your mortgage or other debts secured on it.
Islay Robinson, a founder of Enness, is widely regarded as one of the UK's leading mortgage brokers. He has been instrumental in delivering some of the most complex and high value mortgages in the UK.