What is a bridging loan?
A bridging loan is a form of property finance that is used as a short-term alternative to more traditional finance products, such as mortgages.
Unlike a mortgage, a bridging loan often has no monthly repayments, with the interest instead being ‘rolled-up’ into the loan, and repaid when the loan is settled.
Loans are usually taken for anything from 1 month to 18 months, although regulated bridging loans (those secured against your home) are restricted to a 12 month term in most cases.
When can bridging be used to finance a barn conversion?
When it comes to financing barn conversions, there are several reasons why borrowers choose bridging finance. They are:
- Fast property finance – Bridging can be used to finance a purchase quickly, either to fund a time-sensitive transaction such as an auction purchase or below market value purchase.
- Funding for conversion – When converting a property into an MUFB, a bridge loan can be used to finance both funds towards to purchase or refinance of the asset, plus additional funding for conversion costs. This finance is known as property conversion finance.
- Finance to sell – When looking to finance a property to sell without the need to make monthly payments, this type of finance is the ideal solution.
- Chain break finance – Bridging finance can be used to fund a property chain that would otherwise collapse. It allows you to borrow against both your existing property and the new one (or just one if you prefer) to enable you to transact in line with the property chain.
How much will it cost?
Bridging loan rates start at 0.39% per month, and loans for barn conversions tend to cost between 0.39% to 0.75% per month.
The rate you pay is dependent on the current state of the property, your plans for it and your desired loan to value (LTV).
To get an exact quote based on your circumstances, get in touch with us and we’ll be happy to help. We can even provide free bridging loan advice and a bridging loan agreement in principle in 1 hour.
Will I qualify?
If you own or are purchasing a barn conversion, have sufficient equity or deposit and a reasonable plan, there is a great chance that you’ll qualify.
The key to a successful application is your exit strategy – how you plan to repay the loan.
As a short-term finance product, your plan for repayment will be called upon very quickly and is imperative to ensuring that neither yourself or the lender falls into trouble on the loan.
At ABC Finance, we help you to ensure that your exit strategy is realistic. Where you’ll repay the loan by refinancing to a new mortgage, we can even get that application approved in principle upfront and arrange it for you when the time comes.
Read more – Property refurbishment loan calculator or Bridging loans for HMOs.
Will I qualify if I have bad credit?
Yes, we can offer this type of finance to borrowers with bad credit.
How quickly can I receive the funds?
We can arrange this type of finance in as little as 3 days in extreme cases, although the average application takes a little longer than that.
It’s sensible to expect to receive the funds in 2-3 weeks in most cases.
While some lenders can complete quicker than this, they tend to charge higher interest rates and fees. For this reason, lenders that specialist in extremely fast bridging loan completions should only really be used when speed is imperative.
