A bridging loan is a short-term loan secured against an asset, typically buildings, but this can extend to any property. Interest rates are higher than more traditional finance products by virtue of the speed at which they are arranged, the risk the lender takes and the short term nature of the loan.
Frequently Asked Questions (FAQs)
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Because of its relative expense, bridging is only ever designed to be a short-term solution. We will be actively looking ahead to your exit – how you are going to repay the loan on or before its end date. ‘Sale of the asset’ is common but changes the risk profile of the loan. Refinancing is generally the best option and we are well placed to assist you in this respect through our Enness Private Clients and Enness Private Office arms. There are a whole host of other options, including business assets, family and friends, and pure luck. Rest assured this is something we will work hard on, as it can make a real different to the cost of the loan.
We need to know the following as a minimum:
- what asset will be used as security and its value
- what the funds will be used for
- how the loan will be repaid
- your assets and liabilities
The more we know about you, your plans, and your wider circumstances, the more effectively we can structure your loan.
Not necessarily. The breadth of the market creates keen and competitive pricing if you know where to look. We have on occasion arranged bridging finance at similar rates to mainstream residential mortgages.
We can tell you whether your plans are feasible and what pricing you can expect, in principle, in a matter of hours.
The maximum is normally 12 months, but this can be extended. 18 months or more is possible for development loans. There is no minimum, but you need to be aware of exit fees.
Our last count of formal lenders runs to 80 or so, but you then need to add in private funds, private individuals, private banks, peer-to-peer lenders and a whole host of other sources. In a world of very low returns, secured lending is an attractive space. This is good news for you, as it means we will almost always be able to find a lender to help.
Bridging loans are rarely dependent on personal income as interest can be ‘rolled up’, ‘compounded’ and ‘added to the loan’. If you can service the loan (and prove you can) you can avoid rolling up the interest and thus save on interest.
We normally allow a day to get a formal offer from a lender; this depends on how quickly you give us the information we need. Valuations are done as fast as we can get one of our known surveyors to get out and write a report, and then funds are available as quickly as the lawyers can complete the formalities. Whilst 3 days is usually the fastest possible (this is difficult no matter what some firms claim) a week is usually the minimum. We will be honest with time-frames and you can be sure it will never be us holding things up.
We cover every corner of the UK.
You are asking this question because you have had some blips, but rest assured yours won’t be the worst we’ve seen. Not all lenders will be willing to lend to you, but we’re confident we can find someone able to help.
The minimum age is 18. There is no maximum age for a bridging loan, but sadly the older you are the harder it is to arrange a loan. We have arrange loans for people well into their 90s and are always keen to find a solution for our more mature borrowers.
This is a fee payable if you repay the loan within a set time period. Some lenders have no early repayment penalties; others can run to 3-6 months or even for the full duration. Getting this bit wrong can be a costly error but, as it is fully negotiable, there is no reason to trip up here – unless you receive poor advice.
Yes. There will be fewer lenders available to you, however, and some nationalities present more challenges than others.
Most of them have published ‘set’ criteria, but if your broker is good enough and the loan has merit, many are prepared to be flexible.
Yes – most lenders adopt a position of ‘dual representation’ which means one lawyer acting for you and one acting for the bank. This gives everyone more protection and is hugely recommended. Getting the right solicitor is of paramount importance, and we can help you here if necessary.