Bridging Finance & Short Term Property Loans

Bridging finance and short term property loans

Bridging finance and short term property loans for investors and developers.

Investment Property Partners is a leading independent property investment specialist advising clients throughout the UK and internationally. In addition to our property investment services we offer a range of complimentary bridging finance, short term property loans, and insurance and professional property support solutions.

Bridging Finance

Essentially, bridging finance often called a bridging loan is a flexible short-term property finance option that can be accessed relatively easily and can be secured and in place very quickly allowing property investors and developers to capitalise on time sensitive opportunities for value creation.

Bridging finance is commonly used by individual property investors, developers and real-estate investment companies and are normally secured against residential or commercial property assets.

One of the biggest advantages with this form of bridging finance is that the duration of the loan can be super short – sometimes 24 hours – whilst the maximum term can be anything up to 12 months or more.

This means that there is plenty of flexibility and opportunity for borrowers to make the most of their loan finance – irrespective of their financial situation.

Another big plus point is that the lenders decision to issue a bridging loan will normally be made within a matter of hours.

Basically, for investors who need urgent cash to fund profitable real estate and property development projects this form of bridging finance can be an extremely powerful tool.

One thing to bear in mind however, is that higher rates of interest may mean bridging loans are less cost effective for longer term funding where alternative sources of finance should be investigated.

Interested in Bridging Finance & Short Term Property Loans?

If you’d like to learn more about our bridging finance, short term property loan and investment capabilities and how we can help you, if you’d like to receive information about investment properties for sale, including the latest new developments and off-market investment opportunities, or if you’d like to discuss your requirements in more detail please contact us today:

Bridging Finance for Property Developers

Bridging finance is especially suitable for investors and property developers who find the flexibility of this form of short term property finance fits well with their financial situation at different periods throughout the construction and development cycle.

Other reasons property investors find short term bridging loans attractive include:

  • Raise Finance Quickly

    Helping to raise finance quickly on an attractive development site or property that has just come up for sale.

  • Buying at Auction

    Buying at auction where a substantial and immediate deposit is usually required as part of the acquisition process.

  • Delayed Sale

    Bridging a shortfall in funding between buying and selling a property when a sale is delayed.

  • Securing a Deposit

    Rapidly raising a deposit to secure a property acquisition.

  • Development Completion

    Completing an existing development.

  • Renovations

    Refurbishments and renovation work.

All of these are vital for property developers who are all too aware that bridging loans and short term property finance options can help with each scenario so that they do not lose money in the long term by missing out on a high potential property acquisition, delaying a property’s completion or having to postpone a new build or refurbishment.

The Benefits of Bridging Loans & Short Term Finance

If used under the right circumstances bridging finance can offer a number of important benefits including:

  • Speed

    Finance can be secured quickly, usually within 7 to 14 days, often quicker if speed is essential.

  • Flexible Term

    The duration of the loan is often more flexible, usually from 1 to 12 months to fit the borrowers financing requirements more closely.

  • Extended Borrowing Limits

    Borrowing limits can sometimes be extended; many lenders will consider 75% to 100% funding basing their loan to value criteria on open market asset value rather than purchase price. If a higher loan to value amount is required the borrower may be able to offer additional security.

  • Flexible Interest Payments

    Flexible interest payments; with agreement at the outset borrowers may be able to roll interest up to the lenders maximum loan to value, paying it off in a single tranche on completion of the project.

In comparison to longer term lending, short term property finance options like bridging loans can prove to be more expensive.

However, under certain circumstances the flexibility,  convenience and availability of quick cash can often far outweigh the fact a bridging loan is the more expensive option.

In reality property investors and developers should review each stage of a project and select the most appropriate funding solution that meets their specific criteria.

This may involve a hybrid approach to investment funding where alternative finance solutions are considered at different stages.

Lending Criteria for Bridging Finance

To ensure an investor obtains the best possible finance deal for their project they should prepare well and understand in detail the typical lending criteria required by specialist short term lenders.

Bridging loans are just like any other credit option, whereby an investors current financial situation will be taken into account before any offer is made.

Always remember that the credit profile of the borrower is paramount when it comes to getting the desired property finance.

Not only that, but the strength of the development or property asset (market value) and the investors exit strategy will also be taken in to account, as will the availability of a deposit or a significant upfront cash contribution.

It is also worth bearing in mind that some interest rates will be based upon the proposition in question – so expect to pay more on uncertain, riskier projects.

Short Term Bridging Finance Fees & Expenses

Depending on the lender, a property investor may be required to pay a range of fees associated with the loan application itself.

However, these finance fees will not usually exceed two per cent of the total loan amount.

Other fees that you may need to account for are exit fees, legal fees, and surveyor’s fees.

The latter is the cost that will be payable to the firm hired to value the property, whilst an exit fee may also be charged by the lender when the bridging loan is repaid.

Normally this exit fee will amount to one month’s interest and will be charged regardless of whether the loan has gone the full duration or not.

Additionally, legal fees should always be expected, just like any other finance option.

Specialist Bridging Finance & Short Term Loan Solutions

As a leading independent property investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.

If you are a property investor or developer looking for short term property finance solutions including bridging finance please contact us today to discuss how Investment Property Partners can help.

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Property development finance guide
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Commercial property valuation using the profits method
Capital gains tax property disposals

Further reading…

More information on bridging loans and short term bridging finance options from Wikipedia here… here →