A Bridge Over Troubled Water?

Bridging is one of those things that people sometimes struggle to understand how it works. Especially those new to this business. Simply put, it’s a mortgage to use on an unmortgageable property!

If you are not able to put a normal mortgage on a property due to its state of repair or sale terms, but with a bit of work the property could be bought up to market value, then you can ‘bridge the gap’ between now and then!

Bridging loans are often set up for 3-12 months and give you the time to get the work done and signed off.

You can then refinance for the full market value and potentially gain equity. You could then pull this back out to cover your renovation costs or sell to a better value – more profit.

Bridge loans are based on the initial sale price and are usually around 65% LTV once your fees etc have been calculated, however, we can also arrange for 85% Gross / 72% Net loans if needed.

Most bridging loans are not serviced monthly, but ‘rolled-up’, where the interest is calculated on X months and paid upfront with the fees (hence the lower net LTV). This allows you to not worry about a monthly payment when your outgoings are being spent on repairs etc.

Rate wise, they are charged monthly rather than per year, and are based on the amount of work to be done as well as the LTV requested, but they are usually around 0.7% to 1.2%.

Bridges are sometimes considered expensive, but this is usually due to people being misinformed that any property can be mortgaged in any state or that a mortgage can be completed in 28 days. They can be an asset in the toolbox of finance options for the right investor/ businessperson.

Bridges are also often used for auction properties as they can facilitate lending very quickly, usually less than a month, whereas standard mortgage lending is often dragging on for 3-6 months. It allows for a property to be bought quickly and then updated and refinanced to a higher level ASAP.

Until you have significant liquid funds, this is probably the best way to buy and refinance or buy to flip.

Some lenders even offer ‘bridge to let’ products where you bridge and then when the work is done, refinance in-house to a standard mortgage. These can be very helpful if the property needs a lot of work done or it’s a bit quirky. They often have the same underwriter and valuer for the whole process, meaning less chance of downvaluing once works are done.

Every quote is personal, so get in touch and see what you can achieve using a Bridging loan.

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