Bridging Finance

How Are Bridging Loans Used?

The uses of bridging loans are as follows:

• If you need a fast offer of funds or need to complete a transaction quickly
• You are buying a property which is un-mortgagable or has a complex title
• You can't access the main finance lenders due to an unlimited number of reasons
• You need to release equity from a property you own quickly before you refinance to another lender
• You want to complete a refurbishment on a property before selling it or refinancing it
• You don't want to go through a long and granular mortgage application with a traditional lender 

Really, however, bridging finance can be used in a multitude of scenarios and for practically any reason.

Bridging finance is a short term solution

Bridging loans should only be used as a short term solution and not for the long term.

Every lender will be very interested in how you intend to "exit" the loan - how will you eventually repay it.

The main options generally are:

• Refinance - arrange for another lender to repay the bridging loan with a new loan at a much better interest rate. 
• Sale of the property - often bridging loans are repaid out of the sale proceeds once the property is sold - this, however, can be an unknown timeline.
• Sale of other assets - other property, other assets, stocks/shares or business holdings.

We work with the entire market place and will take the time to understand you, your plans and your financial position so that we can not only answer the question of how you will exit, but also deliver that plan for you.

Rolled up, retained or serviced interest payments

Bridging loans are often structured so that the interest rate is a percentage of the loan amount payable on a monthly basis.

For example, 0.45%, 1% or 2% per month.

There are 3 ways to pay this amount:

Retained Interest 

In this approach, the 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 from the loan.

Rolled Up Interest 

Here, each monthly payment is added to the capital outstanding on a monthly basis and you pay it all back when the loan is repaid.

Serviced Interest 

This approach means that the borrower meets the interest cost monthly as one would with a traditional mortgage.

These structures of the loan are vitally important in terms of the total cost of the loan, the cash flow of the borrower and how much can be secured against the property. 

We will work through these to make sure that you are in the best position possible.