What Are Bridging Loans Used For?
Bridging loans are used as a short term solution for purchasing properties under a tight deadline, such as breaking chains, purchasing property at an auction or ceasing a commercial opportunity. Also known as bridging or bridge finance, this acts as a way to bridge the gap between the purchase of a property and sale of another.
Bridging loans have gained huge popularity in the last decade as an alternative form of funding where mainstream banks are more restrictive in their terms and because of the speed of funding, with access to capital in weeks, rather than months.
Popular reasons for using bridging loans include:
- To complete a property transaction quickly
- To break a property chain
- To purchase property at an auction (see auction finance loans)
- Finance property renovations
- Secure land purchases
- Purchase assets with no or limited income
- Buy properties that are distressed or vacant
- Cease business opportunities
For any bridging enquiries, you can speak to our award-winning customer service team on 0203 051 2331 or email us at enquiries@mt-finance.com
Who Uses Bridging Loans?
Property developers and investors are very popular candidates to use bridging loans to access fast capital. When looking to expand their portfolios and complete properties quickly, bridging finance offers more speed and flexibility compared to traditional banks and alternatives. Also, for those developers that have funds tied up in other assets, the flexible nature of bridging allows for portfolio expansion.
Bridging is also used for businesses with a lot of inventory, property or assets that might be looking to access capital for growth purposes. For instance, bridging is popular for hotels looking to do refurbishments and a number of large airlines and aviation companies have also used this type of finance.
UK homeowners can use bridging to break a property chain and become cash buyers, helping them to complete quickly on their next home purchase. This falls under regulated bridging and is not something offered by MT Finance.
Bridging loans are popular for developers who are looking to complete property deals fast and carry out refurbishments.
What Are The Terms For Bridging Loans?
For MT Finance, the terms for bridging are:
| Feature | Details* |
|---|---|
| Rates | From 0.85% |
| Loan Type | 1st & 2nd charge loans |
| Loan Amount | £50,000 – £10,000,000 |
| LTV | Up to 70% |
| Loan Term | 1-24 months |
| Property Type | Residential, commercial & semi-commercial |
| Credit Considerations | Adverse credit, CCJs & arrears considered |
| Fees | No up-front fees, no exit fees, no ERCs |
| Credit Scoring | No credit scoring |
*Security is required
*Please see our product guide for latest terms.
Reasons To Use Bridging Loans
Bridging loans can be used for both residential and commercial properties. You may wish to add value to the property and sell it, or rent it out tenants to earn additional income.
Complete a Property Transaction Quickly
The main benefit of bridging is that it allows you to complete a property transaction faster than alternatives such as mortgages. The nature of the product is made for speed of funds, with deals often completed in 2 to 4 weeks. If there is a BTL opportunity that you are looking to cease and face steep competition, a bridging loan could help you get your offer and completion over the line faster than any competitors.
Break a Property Chain
If your sale or purchase is being delayed due a long property chain, such as waiting on other parties in the chain or a recent break from the chain, a bridging loan allows you to become a cash buyer and move immediately on completion. For ambitious property developers, they have the opportunity to move faster than waiting for a long chain to complete.
Purchase Property at an Auction
There are exciting opportunities to buy a property at auction, whether it is in probate, distressed or at a discounted rate. When buying at an auction, you will need to provide a 10% deposit on the day that you win the bid and then you have 28 days to provide the remaining 90%. Bridging can provide an important gap in funding to help complete the auction purchase, which you may have to top up with your own savings or investment elsewhere.
Finance Property Renovations
Bridging offers an effective and fast way to access funds to carry out light or heavy refurbishments (see refurbishment loans). This typically acts as a second charge loan and can provide significant funds to carry out renovations to increase the value of the property. You may decide to sell the property once completed or convert to a buy-to-let mortgage and rent it out to tenants.
Once the renovation work is complete and your property is more valuable, you have the option to refinance to another product or mortgage which could be longer-term and have more favourable rates.
Secure Land Purchases
Buyers may use a bridging loan to acquire land while awaiting planning permission. Once approved, you would not use a bridging loan for development work, instead they might refinance with a development loan or mortgage.
Purchase Assets With No or Limited Income
Bridging loans can offer more flexibility in terms of criteria than a traditional bank. Even if you have no assets or a limited income, a lender might take a view if you have a valuable property and carefully produced business plan and financials to supplement it.
Buy Distressed or Vacant Properties
Bridging lenders are more likely to take a view on developers looking to buy distressed or vacant properties and planning to fix them up. The funds can be used to complete and renovate the property to add significant value.
Cease Business Opportunities
For businesses of all types, you may use a bridging loan as a way to cease a commercial opportunity. Using your land, property or assets as security, this type of fast and short term funding could prove very valuable before more longer term financing becomes available.
How Soon Can I Receive a Bridging Loan From MT Finance?
MT Finance can offer a decision in principle in 24-48 hours of your initial enquiry. Subject to a valuation, survey and underwriting, we aim to complete bridging deals within 2 to 4 weeks or as quickly as possible.
For any bridging enquiries, you can speak to our award-winning customer service team on 0203 051 2331 or email us at enquiries@mt-finance.com