Bridging Loans for Property Development

Bridging finance is a strictly short-term facility, used to ‘bridge’ temporary financial gaps and fund time-critical purchases or investments.

A bridging loan can be organised within a few working days, and the loan is repaid as a single lump-sum payment after one to 18 months. Increasingly, property developers are turning to bridging loans as a flexible, accessible and affordable alternative to traditional loans and commercial mortgages.

What is Bridging Finance Used For?

Bridging finance can be used by developers and investors in a variety of ways, including the following:

• Purchasing properties at auction and selling them on at a profit
• Buying and renovating derelict properties to be sold for capital gains
• Investing in homes to be renovated and let out for long-term gains
• Buying properties and developments considered ‘unmortgageable’
• Covering all types of unexpected capital shortfalls mid-project

What is the Difference Between Open and Closed Bridging Loans?

With a closed bridging loan, the borrower knows in advance exactly when and how they will repay the loan. For example, they may have lined up a buyer for the development upon its completion, and will use the funds raised to repay their debt.

By contrast, an open bridging loan is issued with no concrete repayment date or method in mind. As open bridging loans are considered higher-risk by lenders, they usually attach higher interest rates and borrowing costs.

When Does Bridging Finance Need to Be Repaid?

Bridging finance must be repaid on or before the date agreed with the lender at the time the facility is taken out. This is usually one to six months after the loan is issued, but early payment often paves the way for significant savings on monthly interest.

How Much Does Bridging Finance for Property Development Cost?

Monthly interest on a property development bridging loan can start from 0.5% or less. Your broker will negotiate on your behalf to ensure you get an unbeatable deal from a top-rated UK lender.

Who Can Qualify for Property Development Bridging Finance?

Eligibility for property development bridging finance is typically established on the basis of two things:

1. Availability of security (collateral) to cover the total costs of the loan
2. Evidence of a workable exit strategy for repayment of the facility

Bridging finance is a more flexible and accessible facility than traditional development finance, and is therefore open to new developers with no provable experience or track record.

What Additional Costs Apply with a Property Development Bridging Finance?

Total borrowing costs vary from one product and lender to the next, which in all instances are always negotiable. Examples of which may include administration fees, arrangement fees, completion fees, valuation fees, legal fees, security fees, early repayment fees and so on.

How Fast Can Property Development Bridging Finance Be Arranged?

If you present a convincing application complete with all required evidence and supplementary documentation, your bridging loan could be authorised and transferred into your account within a few working days.

Is Bad Credit Property Development Bridging Finance Available?

Yes – property development bridging finance is open to applicants with imperfect credit. Your application will be assessed on the basis of its all-round merit – not the usual ‘binary’ exclusion factors like credit scores.

If you have any questions or concerns regarding your credit score or your eligibility for bridging finance, raise them with your broker before your application is submitted.

How Much Can I Borrow with a Property Development Bridging Loan?

Most bridging loan specialists are willing to lend a maximum of 80% of the total value of the asset (or assets) the loan is secured against. This means that if the security you use for the loan is valued at £300,000 at the time, you may be able to raise up to £240,000 with a bridging loan.

There are no specific upper limits on how much can be accessed with property development bridging finance – anything from £50,000 to more than £10 million.

How Can I Apply for Property Development Bridging Finance?

Whether you are planning ahead or in need of support with an urgent bridging loan application, we can help.

Our experienced team will negotiate on your behalf to ensure you get an unbeatable deal from a top-rated lender. We will also guide you through the alternative options available, should bridging finance prove unsuitable for your requirements.

For more information or to discuss the potential benefits of property development bridging loans in more detail, contact a member of the team at UK Bridging Loans today.