Do you need short-term finance? Are you a client looking to up-size your family home or someone looking to down-size? Perhaps you're a property investor looking to refurbish your property? Then a bridging loan may be for you.
Watch Vice President, Chris Lloyd, discuss the benefits of bridging finance and how we at Enness can make this a possibility for the right clients.
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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The uses of bridging loans are as follows:
Really, however, bridging finance can be used in a multitude of scenarios and for practically any reason.
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:
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.
Regulated bridging loans are secured against a property which you have, do or will live in, or a property where a family member will reside.
These loans are regulated by the FCA and the rules around affordability apply - i.e can you afford the monthly payments and how will you retain them.
Unregulated bridging loans are secured against every other property type or use - Buy to lets, property developments, commercial assets and so on.
We cover both sides of the market so you can be sure you are getting the correct advice.
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.
Essential reading for anyone interested in bridging finance, this guide will help you determine whether it’s the right choice for you.
