Bridging Finance

What is Bridging Finance?

Bridging finance is a short-term mortgage secured against property. It is individually negotiated and is usually very fast to arrange. 

It usedto be a very niche product, with lots of negative connotations due to its price. Its main purpose was to allow people to complete on new property purchases before selling an existing home.

Now, however, its use is unlimited. It is a key finance product used wherever mainstream lenders won't, or can't lend. It's a problem solver, an opportunity creator and, in some places, a get out of jail free card.

As for the price - it's negotiable and often nowhere near as expensive as it once was.

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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.