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CorecoOverview

What is a Bridging Loan?


A bridging loan is a short term loan used for up to 36 months. This type of loan is used when “ordinary” term loans (Mortgages) cannot be used. Bridging loans are an efficient option for borrowers who are time restricted and/or await funds to be realised from the sale of another asset. Bridging lenders will lend against the security property and can often include additional properties or land on a 1st or 2nd legal charge basis.

 

Similarities and differences between a typical mortgage and a bridging loan

There are other similar requirements between a typical mortgage and a bridging loan which include:

  • You will still require a deposit/equity for your bridging loan.
  • There are additional costs associated with a bridging loan including valuation and solicitors fees.

There are also some key differences that we think are well worth knowing about before you commit to a bridging loan. These include:

  • Bridging loans tend to have higher interest rates as they are for short term borrowing.
  • They are generally designed as a short term finance option, for example, if you’re buying a new office before your old premises has sold.
  • You will need evidence of an exit strategy (how you intend to pay back the loan). These can include the sale of another property, remortgaging the current property or refinancing to a longer-term mortgage.
  • When working with one of our bridging loan brokers we can arrange to have the interest payments rolled into the loan itself so there is nothing to pay back monthly, only at the end of your loan term.

Often, the property used for security on the loan is the one being sold or bought. However, bridging finance solutions can sometimes be secured against a different property within a portfolio, for example, a buy to let property or holiday home.

Funds made available through bridging finance are often flexible and accessible quickly. However, there are some considerations which you should be aware of.

Bridging loans are often determined by your ‘exit strategy’ or how you intend to pay back the loan. If you have secured the loan against another property, you may risk losing it if you are unable to repay the loan within the agreed contract term.

Contacting an experienced specialist bridging finance broker may help you weigh up the most suitable options for your situation. While a bridging loan may have a high-interest rate, our team of qualified commercial mortgage and bridging finance brokers will work hard to find the most suitable solution for your circumstance.

 

Applying for a bridging loan

When applying for a bridging loan, lenders will want to see evidence of your exit strategy so make sure you have thought about this and find ways to evidence this. This is generally either a remortgage or through the sale of the property or another property. When applying for a bridging loan with Coreco Commercial this is the process we follow however we always treat our clients as individuals and will work around your circumstances to get you the best offer.

1. After getting in contact with us we will assign you a specialist broker that will get in contact with you to learn more about your personal, financial and employment circumstances.

2. Once we’ve learned a bit more about you and what you’re aiming to achieve your broker will ask about your exit strategy and any evidence you have to support it. Your broker is there to support you to make your application as strong as possible.

3. Your broker will then source from the whole of the market, bridging lending terms and find the best product for you. Once agreed with you they will secure an agreement in principle (AIP).

4. Once the underwriting process is complete, you will receive a conditional offer. An acceptable valuation report will need to be provided by a lender appointed valuer.

5. Your full offer, post receipt of a successful valuation report and supporting documents is then sent to your solicitors for completion. Bridging lenders will commonly have their own solicitors representing them for which the borrower will be responsible their fees.

6. Working with a solicitor that is experienced in these transactions will help to speed the process along. We are happy to recommend solicitors we’ve worked with in the past.

 

When Is Bridging Finance A Good Option?

Bridging finance is not just there to help bridge the gap between selling your old property and buying your new one. It can be used in many circumstances from renovating properties, down/upsizing and buying properties at auction.

Here are some other examples of when bridging finance can be a good option:

  • Maintaining Your Place In A Sale Chain
  • Renovating, converting or refurbishment properties
  • Rebridging
  • Downsizing, upsizing and securing your property
  • Buying a property at auction

For more detail on when bridging finance can be a good option take a look at our in-depth blog post.

 

How Coreco Commercial Can Support Your Bridging Finance Needs

Here at Coreco Commercial, we’re experts in finding the right finance option for all classes of borrowers. This can be in both a personal or corporate entity. Our brokers have long standing relationships with both commercial and specialist lenders which allows us to move quickly and secure your finance as quickly as possible.

We have also worked with experienced solicitors and are happy to put you in touch with them if you don’t already have a preferred option.

We can offer:

  • Our brokers have experience in delivering market-leading bridging.
  • We have been able to secure interest rates as low as 0.49% pm.
  • Working with our partners we can offer lower rates for £1 million+ loans.
  • Fast Finance – if required we can secure your bridging loan within 10 working days, depending on your circumstances.
  • Flexible repayment terms up to 3 years.
  • We work with a range of providers that can allow for interest to be rolled up which means no monthly payments, just a single payment at the end of your loan term or alternatively interest can be retained from the initial advance.
  • Bridging finance for business purposes such as paying an HMRC tax bill, purchasing land or new premises and deposit for new purchases.
  • For speed, we have access to lenders who will allow for Desktop/Automated Valuation Methods for valuation reports.

Keen to see bridging finance in action? Take a look at how we helped secure bridging loans for our clients.

Our friendly team of expert brokers are on hand to answer any questions you may have about bridging loans and finance. Call us on 020 7220 5100 or contact us online today.

CorecoFaqs

FAQs

  • What is the difference between a bridging loan and a standard loan?

    With a standard loan, the interest rate may be lower but they do not offer the flexibility and speed of a bridging loan.

    Typically, bridging finance solutions are a short-term loan with a higher interest rate. This is because large funds can be made available quickly to borrowers. The loan can be repaid immediately or up to 24 months later, and often have no fees for exiting your agreed term early so long as the loan has been fully repaid.

  • What types of bridging loans are available?

    Depending on your financial situation, there are different types of bridging finance solutions available. The main two being a regulated bridge and a non-regulated bridge loan.

  • What is a regulated bridging loan?
    • Only suitable when the property is not intended for business purposes, for example a borrower or family who are living or will live in the property
    • Typically limited by regulatory conditions
    • An exit plan is required, often it’s the sale of the security (or another) asset or provable refinance
    • There are a limited number of lenders offering regulated bridging loans.
  • What is a non-regulated bridging loan?
    • Non-regulated bridges offer more choice than the regulated option
    • There are servicing or non-servicing options available
    • Typically, lenders offer loans on a gross loan basis and deduct the interest to be paid over the term of the loan
    • Borrowers should look closely at the type of interest calculation, as often lenders will apply interest on to the interest borrowed
  • Who can get bridging finance?

    At Coreco Commercial we’ve been approached by a number of clients who are looking for bridging finance solutions. They include:

    • Homebuyers
    • Homebuyers in a complex chain
    • Residential and commercial property owners avoiding repossession
    • Commercial property developers
    • Landlords
    • Auction buyers
    • Property buyers with undervalued transactions
    • Purchasers with unusual property types
    • Clients with uninhabitable property or structural complexities
    • Land buyers with or without planning

CorecoImportant Information

The important bit


Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.

A percentage of the mortgage amount may be charged depending on individual circumstances. A typical fee is 1%.

Coreco Commercial is a trading style of Coreco Specialist Finance. Coreco Specialist Finance. Registered Office: 117-119 Houndsditch, London EC3A 7BT. Registered in England Number: 06851546

Coreco Specialist Finance Limited is authorised and regulated by the Financial Conduct Authority.

Some types of finance offered by Coreco Commercial are not regulated. Please contact us for more details.

Coreco Commercial advisers are experienced mortgage advisers but we are not tax advisers. Please seek independent tax advice if required before you decide to proceed.

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We know that all our clients are unique, and therefore the finance you require needs a different approach. We pride ourselves on providing a client focussed journey built around your needs and goals.

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Our team always expresses their professionalism through their authenticity, high level of work ethic, and can-do attitude. We always find the best way for our clients to succeed.

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Our progressive and forward-thinking outlook allows us to guarantee an exceptional level of innovative advice and service, ensuring an effortless, client-centric journey in the ever-changing financial world.

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