Bridging Loans 2018-06-18T22:47:37+00:00

Bridging Loans Explained, Rates & Comparison

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ABC Finance Ltd. offer a range of bridging loan products sourced from a wide variety of trusted lenders. Our expertise in the sector ensures a rapid, secure route to the funds you require. Read on to learn everything you need to know about bridging finance, the products available and how our team of advisers can help you get the best rate.

What Is A Bridge Loan?

A short-term bridging loan is a type of loan used to ‘bridge a gap’. They are often used to secure funds quickly to cover a pressing need. The main reasons people choose a bridge loan are the following:

  • Auction purchases
  • Purchase or refinance of a property in need of refurbishment
  • Release funds quickly to pay unexpected bills
  • To cover mortgage delays

Of course, there are many other reasons that a person may need to raise funds quickly and due to the simple nature of certain lenders application processes, a bridging loan can be an appealing option.

How Much Can I Borrow?

£
£

Latest Bridging Offers

View some of the best offers from our market leading lenders and get started with your application.

Product BL0001 - Apply Now
Interest Rate
0.44%
Lender Fee
1-2%
Max LTV
55%
Security Type
Residential
Min-Max Loan
£100,000 – £5,000,000
Max Term
18 Months
Regulated Accepted?
No
Product BL0002 - Apply Now
Interest Rate
0.48%
Lender Fee
2%
Max LTV
50%
Security Type
Residential
Min-Max Loan
£250,000 – £50,000,000
Max Term
12 Months
Regulated Accepted?
Yes
Product BL0003 - Apply Now
Interest Rate
0.49%
Lender Fee
2%
Max LTV
50%
Security Type
Residential
Min-Max Loan
£10,000 – £2,500,000
Max Term
12 Months
Regulated Accepted?
Yes
CLICK HERE TO COMPARE MORE MARKET LEADING PRODUCTS

Everything You Need To Know About Bridging Loans

From calculators to guides, criteria, faqs and jargon busters, at ABC Finance we have everything you need to know about bridging loans.

Why Should I Work With ABC Finance?

Bridging loans can become complex. There are many bridging finance lenders and therefore understanding all of their criteria can be time-consuming. Since our inception in 2000 we have gained vast experience in securing the best possible terms for thousands of clients, across numerous bridging finance companies. We save you time and money by speaking with bridging finance companies on a regular basis and keeping fully up to date, enabling you to access the whole market and best rates through one enquiry, and we never charge upfront fees. Whether you’re a veteran or taking your first steps into the world of bridging, we believe we are an ideal partner in raising bridging finance. Talk to an expert or choose your own product online.

TALK TO AN EXPERT NOW

ABC Finance is a pleasure to deal with, consistently delivering a personal and professional service to customers and brokers alike. We have been working together for several years and highly value the mutual relationship which has been built. The team always look to go the extra mile and are constantly recognised as an experienced and specialist brokerage. Their approach to customer, broker and lender relations combined with a best in class attitude towards TCF is supported by a highly regarded management team.

Interbay testimonial imageMarc Turner – Senior Business Development Manager, InterBay Commercial

Amazing service…. you will find none better at what they do. Its not just the level of service and professionalism you get with this company its the fact you are dealing with genuine people that really do care and go that extra mile.

5 star Google imageJoe Smith, 5 star Google review

Securing Your Bridging Loan

If you’re looking to purchase a property quickly, or to raise money for your next project, you should consider taking out a bridging loan. As the name suggests, bridging loans are the ideal tool to bridge a funding gap and they’re specifically designed to complete quickly.

With many new lenders entering the market, lending increasing and interest rates reducing, there’s never been a better time to take out a bridging loan.

Bridging Loan Rates

Bridging loan rates usually increase as the loan to value rises. We offer market leading rates across all property types, and can offer the following bridging finance rates against residential properties:

Loan to Value55%65%75%
Interest Rate0.44%0.54%0.64%

We can offer special low rate bridging loans from 0.37% per month, however these are only available for select applications.

Understanding Bridging Loan Interest & Charges

Use the below table to find out interest payable on a £100,000 bridging loan based on the interest rate charged. To calculate the costs of taking a bridging loan for a different amount, try our simple to use bridging loan calculator.

Interest RateMonthly Interest
0.44%£440.00
0.54%£540.00
0.64%£640.00
0.70%£700.00
0.75%£750.00
0.80%£800.00
0.85%£850.00
0.90%£900.00
1.00%£1,000.00
1.10%£1,100.00
1.25%£1,250.00
1.50%£1,500.00

In addition to the monthly interest costs, the chosen lender will usually charge and arrangement fee. Although the fee can usually be added to the loan, it should still be taken into account when calculating the cost of your loan.

The figures below are for a £100,000 loan.

Arrangement Fee (%)Arrangement Fee (£)
1.00%£1,000.00
1.50%£1,500.00
2.00%£2,000.00

The Pros and Cons of Bridging Loans

Bridging loans are a borrowing tool that are growing in popularity. Before taking out bridging finance, you should always be aware of both the pros and cons.

Pros

  • Speed – Bridging loans can be arranged very quickly, with applications usually completing in 5-14 days, with some even completing on the day of application!
  • Rates are falling – The bridging finance market is currently in a rate war. Bridging loan rates now start from 0.44%, with a rate of 0.37% available for select applications. The main drawback has historically been cost, although this is now becoming a definite pro!
  • Flexibility – Bridging finance can be repaid early without penalty. When bridging loans are repaid early, any unused interest is usually rebated, saving you money.
  • No monthly payments – Where interest is rolled up or deducted, there are no monthly payments to make. This can be a major help to cashflow during a refurbishment or marketing period.
  • They allow lending against unmortgageable properties – Loans be used to purchase properties that you would otherwise be unable to borrow against.

Cons

  • They add cost to a property transaction – No matter how cheap your bridging loan is, it will still cost something. This will add a cost to your property transaction that must be considered.
  • Hidden charges – Comparing quotes from bridging loan lenders or brokers can be difficult. On top of the lender arrangement fee and interest rate, many lenders will charge additional ‘fund management’, ‘application’, ‘inspection’ or other fees. These can really add up and mean that the lowest rate isn’t always the best option. It’s important that you consider the total cost of the loan rather than just the headline figures when comparing products.
  • Problems with exit – If you have problems with your method of repaying your bridging loan, this can cause major issues as the end of the loan approaches. If you are unable to repay the loan at the end of the term, you will have to refinance or service the loan, although there is no guarantee your lender would allow you to do either. This can put your property and credit profile at serious risk.

Bridging Loan Example

A client is purchasing a £600,000 investment property at auction, which needs refurbishment. They must raise £300,000 to complete the purchase. This will be secured using a 1st legal charge over the new property and is needed for 6 months.

Purchase Price£600,000
Loan Requested£300,000
Net LTV50%

At the end of the 6-month term, the client will refinance to a buy-to-let mortgage and rent out the property.

In this situation, we could raise the money using an unregulated bridging loan at a rate of 0.44% per month, with a 1% lender arrangement fee.

0.44% interest (£1,320) x6 months£7,920
1% Lender Arrangement Fee£3,000

The arrangement fee can be added to the loan and the monthly payments rolled into the loan, meaning there is nothing to pay until the loan is repaid.

The total to repay would be calculated by adding the total interest and arrangement fee to the loan. In this case the repayment amount is calculated as follows:

Loan Amount£300,000
Arrangement Fee£3,000
Total Interest£7,920
Total to Repay£310,920

In this example, the total cost of repaying the loan would be £310,920, including the cost of interest and charges.

This results in a total cost of £10,920.

In addition to the above, the client would be expected to pay a valuation fee, which is usually paid upfront, once the application is approved in principle. In this example, the valuation fee would usually be somewhere between £900-£1,100.

If the cost was £1,100, this would bring the total cost of the loan up to £12,020.

Would a Bridging Loan be Right for Me?

Bridging loans can be used for a wide variety of reasons and can really save the day. Whether you’re looking to bridging loans to save a chain, exit a property development, downsize in retirement, or any of the other dozens of uses, we’ve got you covered.

There are four major reasons why bridging finance may be right for you:

  1. The property that you wish to raise money against is not mortgageable in its current condition
  2. Refurbishment is required on the property and traditional lenders will not accept it
  3. The funds are needed quicker than a traditional lender can provide them
  4. You are unable to raise money using a traditional mortgage

Whatever your goal, the key is to ensure you are taking out the loan for the right reason and your exit is viable. Taking a bridging loan with no viable exit will generally result in nothing but an expensive delay of the inevitable.

Our advisors work through the entire picture with you to ensure the product is right for you before proceeding. We will assess all your options and ensure a bridging loan is the most suitable product upfront.

Minimising the Risk Associated with Taking Out a Bridging Loan

The biggest risk in taking out a bridging loan is your exit route – the proposed method of repayment. As the interest payments are usually rolled into the loan, even if the interest is high, this often doesn’t cause an immediate problem.

Where monthly payments are rolled into the loan, the only real danger of default lies at the end of the term.

Ensuring the funds are in place to repay is crucial. Where repaying through refinance, this involves ensuring your new lender is happy to lend in principle and that a viable back up plan is in place.

Where sale of property is the proposed exit, always check with local agents to ensure you fully understand the market. An understanding of not only the likely sale price, but also the likely timescales for achieving such a price, and marketing periods of similar sold properties in the area.

By taking these additional steps, you will remove a large amount of the risk from taking out a bridging loan.

Repaying the Loan at the End of the Term

Bridging loans are issued on an interest-only basis. They work in much the same way as an interest-only mortgage, in that they must be repaid in a lump sum at the end of the term.

As the term ends, the lender will contact you to ensure your repayment method is on track and the loan will be repaid.

Finding the Right Bridging Loan Deal

As with other types of mortgage, there are lots of bridging loan products available. Some of the lowest bridging rates in the market compete with comparable mortgage or commercial mortgage rates.

Residential bridging loan rates are now starting from just 0.37% per month, which is just 4.44% per annum.

Compare Bridging Loans

With so many new bridging finance lenders entering the market, and the differences in their pricing and fees, it’s becoming more difficult to find the best deal. That’s why we’ve built our easy to use comparison tool, so you can easily read through the latest market-leading products and use our bridging loan calculator to work out your likely costs.

Remember that you shouldn’t base your decision on rate alone, all fees and charges must be considered. It’s often cheaper to choose a product with a higher interest rate if the fees are lower.

Whether you want to compare rates online and calculate your costs or talk through your circumstances with an experienced advisor, we’ve got you covered. ABC Finance Ltd. can help you through the entire process from start to finish, making the process as simple as it can possibly be.

Talk To A Bridging Finance Expert

Talk to a bridging finance expert today and access the best products for your circumstances.

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