What is a bridging loan?
A bridging loan is a form of short-term property finance that is used to fund the purchase or conversion of an HMO property.
It is used to ‘bridge the gap’ between two events, for example purchasing a property and taking out an HMO mortgage.
As a short-term finance product, they’re usually taken out for a term between 1 to 18 months, with the loan being repaid by a HMO mortgage should finance be required beyond this term.
Why consider a bridging loan to finance an HMO?
Bridging loans are used to finance HMOs for many reasons. They are:
- Speed of transaction – Bridging finance can be arranged very quickly, often in just days. This allows you to purchase a property quickly, often allowing you to secure a lower purchase price.
- Additional funds for conversion – If you require funds for conversion or refurbishment, bridging allows you to do just that. You may even be able to borrow against the future value to release additional funds for conversion.
- No monthly payments – Most bridging lenders allow you to roll-up the interest costs, leaving you with no monthly repayments to make.
Will I qualify?
The key to securing this type of finance is your exit strategy – how you plan to repay the loan. If you have a strong exit strategy in place and sufficient equity or deposit to meet criteria, you have a high chance of qualifying.
For confirmation of whether you qualify, enquire online or call us on 01922 620008 and a bridging loan expert will run through your proposed application and let you know within minutes.
We can even offer a written agreement in principle with full lending terms within 1 hour.
How much will it cost?
We can offer bridging loan rates from 0.39% on HMO properties. Most applications come in at a rate of 0.39-0.75% per month.
The rate charge is dependent on the loan to value of your application, as well as the strength of the security property and your plans for the property post completion.
When taking out property refurbishment finance for internal decoration, the interest rate will remain on the lower end, whereas a large structural project, such as an extension, may slightly increase the rate charged.
Our team can give you a personalised quote on your project, and as a whole of market bridging loan broker can secure the best possible deal.
Moving from a bridging loan to an HMO mortgage
When the time comes to repay your bridging loan and switch to an HMO mortgage, we can handle the whole process for you.
Your advisor will work with you and a dedicated HMO mortgage expert to help you find the best deal, assist with the whole application process and manage repaying your existing lender.
