In the world of property, moving quickly can make the difference between capitalising on an exciting opportunity or having it slip through your fingers. Yet arranging a mortgage is rarely the fastest or smoothest process, which can be a source of huge frustration. Fortunately, there is an answer: bridging finance.
Once considered difficult to source and prohibitively expensive by many, bridging finance has entered the mainstream in recent years. Since it can be arranged quickly (and for unconventional assets), it’s a fantastic solution for many scenarios.
What is bridging finance?
Bridging finance is a short-term loan that can be used as an interim measure when speed is of the essence, or when the property in question is not suitable for a standard mortgage. Unlike conventional mortgages, which can take months to secure, bridging loans can be arranged in a matter of weeks or even days – giving you the agility to seize opportunities.
Bridging loans are usually arranged for time periods of a year or less (although it is possible to agree a slightly longer product term, if necessary) with interest paid monthly. There are different types of bridging finance, including:
- Regulated bridging loans: secured against assets that are or will be occupied by the owner or a member of their family, i.e. a residential property
- Unregulated bridging loans: secured against assets being used for business or commercial purposes or bridging finance taken out under the name of a company
- Second charge bridging: bridging finance secured against a property that already has a mortgage secured against it
What can bridging finance be used for?
Bridging finance can be utilised in a variety of situations. For residential properties, bridging loans can fund gaps between property sales, or help you gain a competitive edge to securing a property quickly.
Bridging finance can be used to purchase and refurbish a property, particularly when the asset is in a state of disrepair and traditional lenders aren’t willing to lend against it. This is something the Articus team regularly assists clients with; upon completion of the refurbishment, we typically help clients refinance their bridging loan onto a longer-term finance option.
Bridging finance is also useful for developers who need a bridging loan as an interim measure while they wait for planning permission on a project, or to purchase a property while changing its use (e.g. from commercial to residential). Bridging finance can even be used to generate short-term cash flow for a business. In other words: there are a huge array of possibilities with this type of loan.
Can overseas residents secure bridging loans in the UK?
At Articus, we regularly receive enquiries from overseas residents looking to secure finance quickly in order to capitalise on an opportunity. Arranging a bridging loan can be a complex process, requiring the help of an expert broker to ensure the application is completed quickly – and this complexity is even greater when an applicant is living overseas.
Fortunately, this is something our team is well-versed in doing. And, to ensure our overseas clients can access finance quickly, we’ve worked hard to build relationships with bridging lenders who are experienced in working with overseas clients. Of course, the availability of bridging finance will always depend on your individual case and background – our brokers can work with you to outline the best possible solution.
Is bridging finance a cost-effective option?
Historically, bridging finance had a reputation for being costly – often prohibitively so. It is certainly more expensive than other types of property finance, and there will typically be arrangement and valuation fees involved.
However, the cost of bridging has decreased significantly in recent years. As many more lenders have entered the bridging finance market, greater competition has driven down costs, and it is now possible to secure bridging loans far more cheaply than in the past.
And even though bridging finance is more expensive than standard mortgage finance, it is still often cheaper than many other forms of loan, so it’s well worth exploring the possibilities. The terms and cost of a bridging loan will depend on your exact scenario, so it’s well worth discussing with a broker to understand your options fully.
Looking for more guidance about bridging finance?
Bridging finance isn’t the right answer for every scenario, but if you have an unconventional case or a need to move quickly, it’s definitely a route to explore. Our team has plenty of experience in this area and will be happy to chat through your options at your convenience.
Download our bridging finance guide to explore this solution in more detail – or speak to an Articus broker to discuss your requirements.
