Within the formal written offer of a bridging loan, the loan is often referred to as a mortgage. The reason for this is that there are many similarities that occur between the two, and in essence, they are basically the same thing.

Bridging loans are secured as a charge on commercial and residential property or land within the UK in the same manner as a mortgage.

Some of the main differences, however, are:

• Bridging loans can be obtained without the requirement to make monthly payments, whereas with a standard mortgage, monthly payments are always required (this does not include an equity release mortgage, which is available only to those over 55). The less stringent income requirements allow bridging loans to be taken by clients who, for whatever reason, cannot show or prove the income needed to make monthly payments. Possible reasons for this lack of income proof could be because the clients are retired and are in the trap of being cash-poor but asset-rich, the client is self-employed but without proper proof of income, the client has a minimum income, but the reason for the bridging loan will put them in a better financial situation, etc.
• The maximum term of a regulated bridging loan is 12 months (18 months for an unregulated loan), whereas with a mortgage, the standard minimum term is usually 5 years.
• Credit blips can be acceptable for bridging finance, provided a suitable exit route is proved, whereas only very minimal adverse credit is acceptable for mortgage finance, and only with a very small selection of lenders.
• Mortgages are virtually always taken on a 1st charge basis and on one property, whereas bridging finance is much more flexible and can be attained as either a 1st, 2nd, or 3rd charge and on multiple properties if required.
• Bridging finance, in certain circumstances, can be used for the purchase or refinance of partly completed and/or defective properties as well as land with or without planning, whereas a mortgage, with the exception of niche products such as self-build mortgages, is virtually always used for the purchase or refinance of fully habitable properties, which include those having kitchens and bathrooms.
• Bridging finance is often used for a wider range of loan sizes, starting at L10,000 and with no limits, and also for a much wider range of uses and scenarios.

The main consideration of any lender before allowing a client to take out a bridging loan is how the money will be repaid. Only if lenders are fully satisfied that the exit route is genuine and plausible will they allow a loan to commence.

A client with a number of London-based properties in his real estate portfolio recently approached us for bridging finance in order to fund the purchase of a large office building in the Birmingham area, which he planned to refurbish before selling on for a considerable profit. In order to get the lowest interest rate on the loan, our client managed to raise £3 million using his residential flats in the capital as collateral. Around 8 months into the bridging loan, with 15 weeks to go before the end of the loan term was reached, we called the client to check that everything was on track, which is when we discovered that the agreed exit strategy had fallen through owing to unforeseen circumstances.

As leading bridging loan experts, we set about sourcing an alternative finance plan, which our client could use to settle the outstanding debt plus the associated borrowing fees. The London-based flats that the client had used as security were in a prime location, and with rates being an important aspect of the refinancing solution, we knew exactly who to approach for the required funds.

Within less than a week, we were able to source a new 12-month loan with low borrowing rates and a value of £3.4 million, which solved all of our client’s problems at once while affording him sufficient time to repay the new debt while completing the sale of his recently refurbished commercial property. Both the lender and client were highly satisfied with the new terms, and our client made the profit he was looking for without losing the properties that he provided as security in the first place.

UK Property Finance has a long-standing relationship with many property investors and excellent customer feedback from our clients as a whole. We pride ourselves on only offering the very best levels of service, and we achieve this through the commitment of our staff and the high standard of lenders with whom we choose to work.

UK Property Finance is a “whole of market,” directly FCA-authorised and regulated master finance broker specialising in bridging loans, development finance, and commercial finance. Our “Whole of Market” broker status enables us to source bridging loans and development loans from any lender in the market, enabling us to provide the very best rates.

Bridging Loans for OAPs: Exploring Options for Senior Citizens

As individuals progress into their golden years, their financial needs and circumstances often undergo significant changes. Whether it’s funding home renovations, covering unexpected medical expenses, or facilitating property purchases, older adults may find themselves in situations where they require short-term financial assistance. One option that may come to mind is a bridging loan. But can bridging loans be accessible to senior citizens, commonly referred to as OAPs (old age pensioners)?

Let’s delve into this question and explore the possibilities and considerations for OAPs seeking bridging loans.

Understanding Bridging Loans

Bridging loans are short-term financial solutions typically used to bridge the gap between a debt coming due and the main line of credit becoming available. They are often used in property transactions, where funds are needed quickly to secure a property purchase while awaiting the sale of an existing property or a more permanent financing solution.

Challenges for OAPs

For senior citizens, accessing traditional forms of credit can sometimes be challenging due to factors such as reduced income, retirement status, or a lack of collateral. Additionally, age restrictions imposed by lenders may limit the availability of certain financial products to older individuals.

Exploring Options

While securing a bridging loan as an OAP may present some challenges, it’s not entirely out of reach. Here are some potential avenues to consider:

• Equity Release: OAPs who own their homes outright or have significant equity built up may explore equity release options. Equity release schemes allow individuals to access the value tied up in their property without the need to sell it outright. This released equity can then be used to secure a bridging loan.
• Specialist Lenders: Some financial institutions specialise in providing financial products tailored to the needs of older adults. These lenders may have more flexible eligibility criteria and be more willing to work with OAPs seeking bridging loans.
• Guarantors or Co-Borrowers: OAPs who have family members or friends willing to act as guarantors or co-borrowers may improve their chances of securing a bridging loan. Lenders may be more inclined to approve the loan application if there is additional support or collateral involved.
• Pension Income: While traditional sources of income such as employment may not be available to OAPs, pension income can still be considered by lenders when assessing eligibility for a bridging loan. Demonstrating a stable and sufficient pension income stream may strengthen the OAP’s case.

Considerations and Caution

Before pursuing a bridging loan, it’s essential for OAPs to carefully consider their financial situation and assess whether taking on additional debt is the right decision. Bridging loans often come with higher interest rates and fees compared to traditional loans, making them a potentially expensive form of financing.

Furthermore, OAPs should explore alternative options such as grants, government assistance programmes, or downsizing before committing to a bridging loan. Consulting with a financial advisor or mortgage broker experienced in working with older adults can provide valuable insights and guidance tailored to their specific needs and circumstances.

Conclusion

While securing a bridging loan as an OAP may present challenges, it’s not impossible. By exploring alternative financing options, leveraging existing assets, and seeking assistance from specialist lenders or advisors, older adults can navigate the complexities of bridging finance and fulfil their short-term financial needs responsibly.

As with any financial decision, careful consideration, thorough research, and consultation with experts are crucial to making informed choices that align with one’s long-term financial well-being.

Bridging loans are a useful tool for bridging funding gaps and expediting projects. These short-term loans, which are usually secured by the property being developed, provide developers with the capital they need to purchase properties, cover building costs, or bridge the period between selling one property and acquiring another.

Bridging the gap between needs and resources

Property development often involves a series of steps and expenses, from acquiring the property to carrying out renovations and securing financing. Traditional mortgages or development finance may not always be readily available or suitable for every stage of the development process. This is where bridging loans step in, effectively bridging the gap between a developer’s immediate needs and their long-term financing options.

Key features of bridging loans for property development

• Short-term nature: Bridging loans typically have a shorter repayment term, often ranging from 6 months to 12 months. This flexibility allows developers to finance their projects without having to commit to long-term debt obligations.
• Secured against property value: Unlike traditional loans, bridging loans are secured against the value of the property being developed. This provides lenders with strong collateral, minimising their risk and enabling them to offer competitive rates.
• Flexible application: Bridging loans can be used for various purposes within the property development cycle, such as:
• Acquiring and holding properties: Bridging loans can help developers secure properties while awaiting planning permission or preparing for renovations.
• Funding renovations and repairs: Bridging loans provide cash flow for essential improvements and repairs, ensuring the property meets necessary standards before sale or rental.
• Bridging the gap between projects: Developers can utilise bridging loans to finance their next project while waiting for the proceeds from a completed development.

Benefits of bridging loans for property development

• Accelerated project timeline: Bridging loans allow developers to access funds quickly, enabling them to start or accelerate their projects without delays due to funding constraints.
• Enhanced competitive edge: By having access to immediate capital, developers can secure properties and commence projects before their competitors, gaining a competitive advantage in the market.
• Reduced risk of missed opportunities: The speed and flexibility of bridging loans minimise the risk of missing out on lucrative investment opportunities due to financing hurdles.

Navigating the bridging loan process

To secure a bridging loan for property development, developers typically need to provide lenders with detailed project plans, financial forecasts, and supporting documentation. Lenders will assess the potential of the project and the developer’s creditworthiness to determine the loan amount and interest rate.

In conclusion

Bridging loans serve as valuable tools for property developers, providing them with much-needed funds to bridge the gap between project phases and accelerate their investment goals. By understanding the benefits, features, and application process of bridging loans, developers can make informed decisions and leverage these financial instruments to achieve their property development objectives.

While some properties on the market will be regarded as “standard” and eligible for a traditional mortgage, others may be regarded as “non-standard” and require the use of alternate methods of funding. In this blog post, we’ll explore what non-standard property types are and how bridging finance can be used to purchase them.

What are non-standard property types?

A non-standard property type is any type of property that does not fit into the typical mould of what most people consider to be a “standard” property.

This can include things like:

• Unconventional construction methods: Properties that have been built using non-traditional construction methods, such as timber frame, modular, or steel frame construction
• Unique properties: Properties that have unique features or designs, such as converted churches or lighthouses.
• Uninhabitable properties: Properties that require significant repairs or are otherwise unliveable are classified as uninhabitable properties.
• Non-traditional use properties: Properties that are being transformed but are not generally used for residential reasons, such as warehouses or factories.

The problem with non-standard properties is that, depending on their particular characteristics, they might not be eligible for conventional mortgage financing.

What is bridging finance?

Bridging loans are more often than not used to “bridge the gap” when you are purchasing a new home and your current one hasn’t yet been sold. Bridging loans are frequently used for this purpose, and they can also be used while you wait for a more conventional kind of funding, like a mortgage.

Bridging finance for non-standard property types

Bridging finance can offer a flexible source of capital that can be adjusted to match the individual needs of the borrower.

This is one advantage of employing it for non-standard property types. This is essential for non-standard properties because they could have special qualities that call for specialised financing.

Before you make a decision on obtaining bridging financing for non-standard property types, here are some tips and pointers to help you navigate the process:

Work with a specialist lender

It is a good idea to use a specialised lender who has experience financing non-traditional property types. This is crucial when it comes to these types of properties. A specialist lender will be better able to offer specialised financing options since they will have a better awareness of the hazards connected with non-standard properties.

Consider the risks

Non-standard properties come with unique risks that traditional lenders may not be willing to take on. Before pursuing bridging finance for a non-standard property, it’s important to carefully consider the risks and ensure that you have a plan in place to mitigate them.

Be prepared to pay a higher interest rate

Bridging finance typically comes with a higher interest rate than traditional mortgage financing. This is particularly true for non-standard properties, which are considered to be at higher risk. Be prepared to pay a higher interest rate when securing bridging finance for a non-standard property.

Have a plan in place for repayment

When securing bridging finance for a non-standard property, it’s important to have a plan in place for repayment. This could entail selling an existing property, arranging longer-term financing or paying off the loan with the proceeds from the sale of the new property.

Building and managing a property portfolio is an exciting venture for investors seeking long-term returns. However, expanding a property portfolio often involves managing multiple transactions simultaneously, which can be financially challenging. Introducing a game-changer: bridging loans. Today, we embark on a journey to uncover the remarkable potential of these financial instruments in empowering investors to conquer the intricate realm of managing multiple property transactions within their portfolios. In this blog post, we’ll delve into the depths of bridging loans and discover the myriad ways in which they can serve as valuable allies for astute investors seeking seamless navigation through the intricate landscape of property portfolio management. Brace yourself for insights that will revolutionise your investment strategy! From leveraging funds for acquisitions to optimising cash flow during refinancing, let’s delve into the world of bridging loans and discover how they can streamline the management of property portfolios.

Expanding your property portfolio

Unlocking a realm of possibilities, bridging loans offer a pivotal advantage to property portfolios by seamlessly providing short-term financing to facilitate acquisitions. Be it the addition of captivating residential properties or the allure of lucrative commercial ventures, bridging loans effortlessly bridges the gap between purchase and securing long-term financing, setting the stage for your portfolio’s flourishing success. This allows you to act quickly and seize investment opportunities without delay.

Unlocking equity for portfolio growth

As your property portfolio expands, you may encounter situations where you need to access equity from existing properties to fund new acquisitions or property developments. Opening the doors to flexibility and boundless opportunities, bridging loans present a dynamic solution, acting as a seamless bridge between the sale of one property and the acquisition of another. By harnessing the value of your existing assets, you can unlock the true growth potential of your portfolio, propelling it to new heights of success and prosperity. Embrace the power of bridging loans and embark on a journey towards portfolio expansion like never before.

Optimal cash flow management

Managing multiple transactions within a property portfolio can place a strain on your cash flow, especially when there are gaps between property sales and purchases. Bridging loans can alleviate this financial burden by providing short-term liquidity. By securing a bridging loan, you can maintain a steady cash flow and ensure smooth operations within your portfolio, avoiding missed opportunities or financial setbacks.

Portfolio refinancing

In some cases, property investors may seek to refinance their portfolio to optimise their financial position. This can involve consolidating existing loans or accessing better interest rates and terms. Bridging loans can serve as a tool during this refinancing process, allowing investors to access immediate funds while the new financing is being arranged. This ensures a seamless transition and avoids potential disruption to on-going property management activities.

Tailored solutions for portfolio management

Every property portfolio is unique, with its own set of objectives, challenges, and opportunities. The beauty of bridging loans is their flexibility, as they can be customised to meet specific portfolio management needs. Whether you require a loan with a specific term, require interest-only payments, or need a higher loan-to-value ratio, bridging loan lenders can often accommodate these requirements, providing tailored solutions for your portfolio management needs.

Managing multiple property transactions within a portfolio requires careful financial planning and strategic thinking. Bridging loans offers property investors a versatile tool to navigate the complexities of portfolio management. From facilitating acquisitions to optimising cash flow and enabling portfolio refinancing, bridging loans can provide the necessary flexibility and liquidity to support the growth and success of your property portfolio. By leveraging the benefits of bridging loans, investors can confidently pursue their property investment goals while efficiently managing their portfolio’s transactions.

Research from Home Selling Expert suggests that a full 31% of all UK home sales fall through at least once before a transaction is completed. This essentially means that buyers and sellers alike have a one in three chance of their plans being laid to waste by broken property chains.

A broken property chain occurs when one or more links in the chain of buyers and sellers fall through, resulting in the entire process being delayed or falling apart. This can be frustrating and costly for all parties involved, but it is also something that can be avoided in many instances.

Of course, there is very little anyone can do to control the behaviour of others involved in a property chain. Buyers and sellers alike are at the mercy of others within the chain, over whom they have little to no influence.

Even so, there are several steps that buyers and sellers can take to reduce the risk of a broken property chain.

Examples of these include the following:

1. Be honest and open. It is important for buyers and sellers to be upfront about their circumstances and any potential issues that could affect their ability to complete the sale. This includes disclosing any financial issues, such as credit problems or debts, as well as any concerns about the condition of the property.
2. Get a mortgage in principle: Buyers should obtain a mortgage in principle before starting the property search. This will give them a better idea of what they can afford and can also help speed up the process once a property has been found.
3. Choose a reputable conveyancer: Both buyers and sellers should work with a reputable conveyancer to handle the legal aspects of the sale. A good conveyancer will be able to identify any potential issues and work to resolve them in a timely manner.
4. Be prepared for delays. Even with careful planning, delays can still occur. It is important for buyers and sellers to be prepared for this possibility and to have contingency plans in place in case the sale is delayed.
5. Be patient: The property process can be stressful and time-consuming, and it is important for all parties to remain patient and flexible.
6. Get a survey: Both buyers and sellers should consider getting a survey of the property before the sale. This can help identify any potential issues and allow both parties to address them before the sale is completed.
7. Consider a bridging loan: If there is a significant gap between the completion dates of the two properties, buyers may want to consider a bridging loan to cover the period in between. This can help reduce the risk of the sale falling through due to financial issues.
8. Get a HomeBuyer report: A HomeBuyer Report is a detailed document that covers the condition of the property and any issues that need to be addressed. This can help buyers understand the true condition of the property and make informed decisions about the purchase.

Of the mitigation methods outlined above, the single best way to reduce the risk of a broken property chain is to accelerate the completion process with bridging finance.

Bridging loans afford mainstream bidders all the benefits usually reserved for cash buyers. Secured against the value of their current home, bridging finance can be arranged and accessed within a few working days, enabling buyers to beat competing bidders to the punch. For more information on any of the above or to discuss the benefits of bridging finance in more detail, contact a member of our team anytime for an obligation-free consultation.

It’s not uncommon for buy-to-let investors to set their sights on properties in need of repairs and refurbishment. The reason being that, as competition for such properties is relatively low, they can often be picked up at rock-bottom prices. After which, the repairs and refurbishments can be performed at an equally low price before turning a profit on the property by letting it out to tenants.

Unfortunately, targeting properties in need of renovations or refurbishments can lead to problems with financing the purchase. This is because the vast majority of traditional lenders will only issue mortgages against properties that are considered habitable at the time of the application. Even if you can demonstrate your intention and capacity to renovate the property after the purchase, you’re unlikely to qualify for a traditional mortgage.

In addition, landlords often seek to expand their buy-to-let property portfolios by purchasing homes at auction. Some are in need of repair; others are perfectly habitable. In both instances, however, it is usually necessary to pay the full purchase price of the property (and any additional fees) within 28 days, sometimes sooner. Needless to say, this is nowhere near enough time to organise a traditional mortgage.

Combined with the increasingly restrictive lending criteria of major banks for buy-to-let landlords, all of the above places prospective investors in a tricky position.

A flexible and accessible alternative

This is precisely why bridging loans are fast becoming the new top choice for buy-to-let investors. A dynamic and flexible type of secured lending, bridging finance goes far beyond the limitations of traditional high-street mortgages.

For one thing, most bridging finance specialists are uninterested in the condition of the property. Even if it is in a pretty sorry state of repair, it has no real consequence for the lender. Instead, the only thing that matters is the borrower’s capacity to cover the loan with acceptable collateral. This may be provided in the form of the property being purchased or any other property currently owned by the applicant.

Likewise, bridging finance can be uniquely convenient and accessible for purchasing buy-to-let properties at auction. Irrespective of how much money is needed, it can typically be organised and transferred to the applicant within five working days. Again, it’s simply a case of the applicant putting up the necessary collateral to cover the loan. The nature and condition of the property being purchased are of no real interest to the lender.

What matters most with a bridging loan are two things: collateral and a viable exit strategy. By exit strategy, this means a clear and validated method of gaining access to the money needed to repay the loan on the agreed date. It’s possible to take out a bridging loan without an exit strategy, but this may, depending on the lender and the loan, result in higher overall borrowing costs.

Speaking of which, the potential value for money of a super-short-term bridging loan also appeals to buy-to-let investors. In many instances, it’s possible to borrow significant sums of money for less than 0.5% per month. Just as long as the loan is repaid quickly (in accordance with the agreement of the lender), overall borrowing costs can be kept to absolute minimums.

The importance of comparing the market

Now more than ever, the importance of comparing the market in full cannot be overstated. Particularly when considering buy-to-let investment opportunities, it is essential to consider as many deals as possible from as many lenders as possible.

The quickest and easiest way is to take your case to an independent broker, who can compare deals from a panel of specialist lenders on your behalf.