Bridging finance is a short-term mortgage secured against your property. It can be a mechanism to release equity from your home quickly before refinancing with another lender. Bridging loans can also be used to buy a new home before your current property sells, renovate a property before you put it up for sale or upsize or downsize without going through a lengthy mortgage process. There’s practically no limit to how this type of financing can be used.
Bridging finance is used when you need a short-term loan. The loan is secured against your property. These loans can be used in many different scenarios, the most common of which are:
Your situation may well be a good fit for bridging finance, even if it doesn’t fit perfectly into one of the above examples.
Bridging loans are a mainstream and cost-effective financing method. Fast to arrange and always individually negotiated, there will be room to arrange a loan that’s tailored to you and your situation.
Sometimes marketed as the ultimate problem solver and opportunity creator, bridging finance is often used in situations where you’re against the clock or temporarily short of capital. It can also be employed when traditional lenders can’t (or won’t) lend for a variety of reasons.
Enness will help you understand the benefits and risks of this type of finance. Working exclusively on your side, Enness will get you the best deal, terms and remove stress from what can otherwise be complex transactions. Available to you 24/7 to answer questions, provide assistance and support throughout your transaction, Enness will save you time, money and unnecessary hassle.
Bridging loans are often structured so that the interest rate is a percentage of the loan amount, calculated on a monthly basis. For example, 0.45%, 1% or 2% per month.
There are three ways to pay the interest rate:
Your 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 on the loan
Rolled Up Interest
Instead of paying a monthly interest payment, interest is added to the outstanding capital (calculated on a monthly basis), and you pay it all back when the loan is repaid
You will need to meet the interest cost monthly as you would with a traditional mortgage
How you pay interest will affect the total cost of your loan, your cash flow and how much you will be able to borrow. Depending on your situation, Enness will talk you through what kind of interest structure will work best for you and will seek out your preferred option from lenders to ensure you are in the best possible position.
Lenders will focus on how you intend to "exit" the loan i.e., how and when you will eventually repay what you’ve borrowed.
Generally, your options will be:
Enness works with the entire marketplace and will take the time to understand you, your plans and your financial position. Your broker will explain your options in more detail and help deliver the plan that is best for you. However you want to repay the credit, remember that this type of borrowing is a short-term financing solution. If you need a longer-term loan, Enness will be able to help you source and negotiate other types of financing.
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Navigating the bridging loan marketplace alone is undeniably challenging, especially if it's the first time you’ve used this type of finance. There are hundreds of lenders, but many will offer you a generic bridging finance deal that’s only partially tailored to your needs if you approach them directly. You’ll also find you’re likely to pay significantly more interest if you take this route.
Staying on top of all the players involved in the transaction when the deal is underway is extremely strenuous if you’re operating alone. Enness will get involved in the transaction and keep all parties on schedule, moving towards your goal. You’ll save significant time and won’t need to be constantly handling the granular but hugely important parts of the deal – Enness will keep you informed at every step of the way but will shoulder the workload for you.
Enness will go straight to the source to get you the best rate and terms that meet all your requirements. From your first conversation with Enness all the way through to drawdown, your broker will be alongside you, answering questions, keeping the plan on track and working tirelessly to get you the result you need.Schedule a chat
Auctions are ideal places to pick up property bargains or buy undervalued property. Bidding goes quickly, but don’t be deceived by the speed things move at: to be in the best position, you’ll have laid the groundwork for a loan well before the hammer comes down.
If you are planning to buy a property at auction, auction finance is the perfect alternative to buying in cash. Auction finance will allow you to get access to capital quickly, which is useful if you want to snap up an investment property. These loans are also a solution if you fall in love with a property that’s being auctioned, and you want to buy it even though your capital is tied up in other real estate and assets.
You’ll need to have cash available to put down on the deposit on the day of the auction and have funds available to buy your property within the three following weeks.
Involving Enness well before the auction will make this kind of property purchase as easy and straightforward as possible. Your broker will start by getting you an in-principle bridging finance option ahead of the auction. Armed with this information, you’ll be well-positioned to make the right bid, based on what you know you can borrow and what you can afford.
Auction finance will be readily available to you regardless of whether you are a seasoned or first-time developer. Whatever your experience, Enness will be able to negotiate an attractive package for you. Lenders typically require more collateral for first-time developers, however, so you’ll want to bear this in mind if you haven’t bought at auction or developed a property before.
Auctions are exciting and it’s easy to get swept up in plans and ideas. Always on your side, Enness will also act as a sounding board, listening to your ambitions, goals and hopes for the property. Your broker will help you understand what kind of auction finance you can expect. You’ll be able to make sure what you can borrow matches your plans for the property, if you need to pare back, or where you have the financial flexibility to do a little bit more.Read more about auction finance
Bridging finance is commonly used when you need capital in order to build or redevelop a property. You may need credit to build or develop a property for commercial use. Alternatively, you might want to construct or renovate your own home or an investment property. You can also use a bridging loan if you have borrowed capital from several lenders to fund work on a property you have already started developing and later plan to sell. In this case, you can pay off multiple lenders and effectively centralise your borrowing, making it easier to manage. Bridging finance for property development is known for being particularly flexible, and the scenarios in which it can be used is very broad.
Most lenders are comfortable lending to first-time property developers, although the more experience you have, the more options will be available to you. If you are less experienced, lenders will certainly consider you, but are unlikely to offer as high a loan-to-value ratio as will be available to more practiced developers.
Bridging loans for property developments are always negotiated on a case-by-case basis. Whatever kind of project you need property finance for, expect lenders to look carefully at your plans (i.e., if you plan to sell or rent the property or if it will be your primary or secondary residence), the development costs, location and total value of the property.
Enness has access to all the leading lenders in this specialist part of the market. Enness will also be able to help if you need a financing solution to a cashflow or capital problem that’s arisen during your property development.
Whatever you need property development finance for, your broker will ensure you have the funds you need, when you need them and to secure you the best deal available on the market.Discuss property development finance
Bridging finance originated in the UK, and it’s here that bridging is most common. If you are buying a property in the UK and the property you want to secure bridging finance against is also in the UK, you will have the most options and flexibility
That said, options do exist if you want to purchase property in other countries, or if you want to secure a bridging loan on an international property or transaction.
UK lenders want to retain their highly competitive position in the international bridging market. As a result, you will find it is relatively straightforward to borrow as a foreign national, secure a bridging loan against an international property or use bridging finance in order to buy abroad.
There are bridging lenders outside the UK, although there tends to be far less choice, especially at the top end of the market. Your circumstances and the location of the property you want to secure the loan against will also influence how much, and sometimes if, a lender will let you borrow.
Regulations and rules surrounding bridging loans vary internationally, and you’ll need to bear in mind that what is usual in the UK may well be different elsewhere. The Enness team will work carefully alongside you to help you understand what you’ll need to consider if you’re not based in the UK, or if you want a bridging loan for an international property.
From negotiating a deal for you to helping you plan for elements like foreign exchange risk and where to seek legal advice, Enness will be with you at every step of the way to ensure your transaction is swift, easy and hassle-free.Learn more about international bridging finance
The UK’s bridging market is highly competitive, and for anyone needing a straightforward and relatively affordable loan, there is an abundance of lenders to choose from.
If your circumstances are more complex, or if you need a large bridging loan (£3 million or above), however, you’ll find it hard to get the best deal by approaching lenders directly. This type of loan is fast-moving, complex and lots of different parts need to come together at the same time, and this is especially magnified for large loans.
There are fewer lenders in this specialist part of the market, and Enness will be invaluable in getting you the most competitive offer and maximum flexibility. Your broker will handle negotiations and ensure your loan is tailored to your situation and meets your needs. Then, they will keep the deal on track and work with the other parties involved (your legal team, the surveyor, your lender, etc.) to see the transaction through to completion smoothly.
Just because you need a large loan, that doesn’t mean you’ll have to endure a lengthier transaction: Enness will be able to secure offers for large bridging loans as quickly as possible and always within the timeframe you need.Find out more about large bridging loans
Regulated bridging loans are secured against a property which you have lived in in the past, currently live in, or will live in in the future. If you have a property that a family member resides in or will live in in the future, this will also be viewed as a regulated loan.
Regulated bridging loans are overseen by the FCA and as a result, there are rules around affordability. This means that the lender will assess how you will pay the monthly loan repayments. To do this, they will look at your income streams and ensure there is enough of a margin that you can comfortably afford to meet the loan repayment schedule.
Unregulated bridging loans are secured against every other property type, or properties for other uses. Buy-to-let properties, property developments, commercial property and others will fall into this category.
Enness covers both sides of the market, and your broker will help you secure whichever type of loan you need.Schedule a chat
Open and closed bridging finance refers to when and how you will pay back your bridging loan.
If you have a clear plan on how you will pay back your bridging loan (i.e., you know you will have capital by certain date, and you’ll use it to pay back the lender) this is a closed bridging loan. Typically, you’ll have a closed bridging loan if you need funds to tide you over until you receive capital that will come to you at a future date - a bonus, the sale of assets or an inheritance being paid out, for example.
An open bridging loan is used if you are less sure of when you will receive the funds to pay back what you’ve borrowed. Typically, this will be when you are waiting on the completion of a property sale to be able to pay back your lender, or a similar scenario.
Regardless of whether you will opt for an open or closed deal, it’s critical to have a solid plan in place for the exit of your loan. First and foremost, lenders will want to know exactly how you plan to pay back the loan, but it will also be important for your own peace of mind and feeling secure with your options and choices.
Enness will help you understand the risks and advantages of open and closed bridging loans. Your broker will help you pull together a game plan for your exit and present it to the lender in the most compelling way.Get In Touch
Have an informal, no-obligation chat with one of Enness’ brokers who will listen to what you need and ensure a bridging loan is right for you. Your broker will explain your options and the terms and rates Enness will likely be able to negotiate for you. You can ask questions, and Enness will explain some of the risks and benefits of a bridging loan, so you fully understand how this type of financing works.
If you decide to go ahead, your broker will then approach lenders on your behalf. Enness has access to hundreds of lenders and knows exactly which the ‘best fit’ lenders for your situation will be, so things will move very quickly at this point. If needed, Enness will be able to secure you an offer in as little as 24 hours. Your broker will talk through your offer(s) to help you understand the differences and benefits of each, so you can make an informed choice about what the best option is for you.
When you accept an offer, lots of moving parts come into play. Your lender, legal team and the surveyor all need to be working together to get the transaction done on time. Enness’ broker will stay involved to support you, help you troubleshoot and keep the different parties moving. Enness will be invaluable in helping to ensure that your transaction is completed smoothly and on time.
Enness’ guide makes essential reading for anyone thinking about bridging finance or considering a bridging loan.
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