A bridging loan is a short-term form of finance secured against property or land. It is designed to bridge a temporary funding gap until a longer-term solution becomes available.

Bridging finance can be used for situations such as buying a property before another property has sold, purchasing at auction, funding refurbishment work or acquiring property that may not currently meet standard mortgage lending requirements.

A bridging lender provides short-term finance secured against one or more properties. The lender will assess the value of the security, loan-to-value, purpose of the borrowing and how the loan will ultimately be repaid.

Once the valuation, underwriting and legal work are complete, the funds can be released. The loan is then repaid through an agreed exit strategy, such as selling a property or refinancing onto longer-term finance.

Common uses for bridging finance include:

• Buying a property before selling an existing property
• Breaking a property chain
• Auction property purchases
• Property renovation and refurbishment
• Buying an unmortgageable property
• Buy-to-let investment
• Commercial property purchases
• Land purchases
• Short-term property refinancing

Bridging finance can often be arranged faster than a conventional mortgage, which is one of the reasons it is commonly used for time-sensitive property transactions.

The actual completion time will depend on the lender, valuation, legal work, property and complexity of the transaction. If you have a fixed deadline, such as an auction completion date, it is important to make your broker aware as early as possible.

The amount available will depend on the value of the property being used as security, the required loan-to-value, the lender's criteria and the strength of your proposed exit strategy.

Gordon Blair can assess the overall transaction and identify suitable bridging finance options based on your circumstances.

Maximum loan-to-value varies between lenders and depends on the type of property, the transaction and the overall risk profile.

A lower LTV can potentially provide access to a wider range of lenders and more competitive terms.

The total cost of bridging finance can include more than just the interest rate. Depending on the lender and transaction, costs may include:

• Interest
• Arrangement or facility fees
• Valuation fees
• Legal fees
• Administration fees
• Broker fees, where applicable
• Exit fees, where applicable

It is important to compare the overall cost of the facility rather than looking only at the headline interest rate.

Bridging loan interest rates vary depending on factors such as loan-to-value, property type, loan amount, location, borrower profile and the proposed exit strategy.

Rates are often quoted monthly rather than annually. Speak to Gordon Blair for an assessment based on your individual bridging finance requirements.

Depending on the lender, interest may be structured in several ways:

• Serviced interest: interest is paid monthly.
• Rolled-up interest: interest is added to the balance and repaid when the loan is redeemed.
• Retained interest: an agreed amount of interest is retained by the lender at the start of the facility.

You will usually need sufficient cash or equity to meet the lender's required loan-to-value.

In some cases, additional property can be offered as security, which means the lender may assess the combined value of the available security rather than the purchase property alone.

In certain circumstances, bridging finance may cover 100% of a property's purchase price where sufficient additional security is available.

This does not mean that standard 100% bridging finance is available for every borrower. The lender will assess the overall loan-to-value across all security offered.

An exit strategy explains how the bridging loan will be repaid. It is one of the most important parts of a bridging finance application.

Common exit strategies include:

• Selling the property
• Selling another property
• Refinancing onto a residential mortgage
• Refinancing onto a buy-to-let mortgage
• Refinancing onto commercial finance

Potentially, yes. Bridging finance may be used to purchase a new property before your existing property has sold.

The sale of the existing property can potentially form the exit strategy for the bridging loan.

Yes. Bridging finance can potentially provide short-term funding if your existing property sale is delayed but you still need to complete the purchase of your next property.

Yes. Bridging loans are commonly used for auction purchases because buyers typically have a short period in which to complete after a successful bid.

Arranging your finance before bidding can help you understand your budget and whether the required completion timescale is achievable.

Potentially. Bridging finance can sometimes be used for properties that do not currently meet standard mortgage requirements.

This can include properties requiring substantial renovation before they can potentially be refinanced onto longer-term mortgage finance.

Yes. Bridging finance can potentially fund the purchase and refurbishment of a property before it is sold or refinanced.

For more substantial construction or development projects, specialist refurbishment or development finance may be more appropriate.

Yes. Property investors may use bridging finance to purchase and refurbish a property before refinancing onto an appropriate buy-to-let mortgage.

This type of transaction is often referred to as a bridge-to-let strategy.

Potentially. Bridging lenders may assess applications differently from mainstream residential mortgage lenders.

The lender may consider the property, loan-to-value, circumstances surrounding previous credit issues and the strength of your exit strategy.

Potentially, yes. Being self-employed does not automatically prevent you from obtaining bridging finance.

The lender will consider the overall transaction, including the property being offered as security and how the facility will be repaid.

Yes. Bridging finance can potentially be arranged through a limited company, subject to lender criteria.

This structure is commonly used in property investment transactions.

Yes. Bridging finance can potentially be secured against residential, commercial and mixed-use property.

Available lenders and terms will depend on the property, borrowing requirement and proposed exit strategy.

Whether a bridging loan is regulated depends on factors including the use and occupancy of the property and the purpose of the borrowing.

Certain loans involving a home occupied or intended to be occupied by the borrower or certain family members may fall within regulated mortgage rules. Other property investment and commercial bridging transactions may be unregulated.

A mortgage is generally intended as long-term property finance, whereas a bridging loan is designed primarily for short-term borrowing.

Bridging finance can also provide greater flexibility for time-sensitive or non-standard property transactions, although the cost of borrowing can be higher.

Many bridging loans can be repaid before the agreed end date, but individual lender terms vary.

Some lenders may apply minimum interest periods or other redemption conditions, so the terms should be checked before proceeding.

If your planned exit is delayed, it is important to contact your lender or broker as early as possible.

Depending on the circumstances, refinancing or an extension may potentially be considered, but this is not guaranteed and additional interest or fees may apply.

Bridging finance is secured against property, so failure to repay can ultimately put the secured property at risk.

Legal work will normally be required because the lender is taking security over the property.

Where a transaction has a tight deadline, using a solicitor experienced in bridging finance can be particularly helpful.

Most bridging lenders require some form of property valuation, although the exact valuation method will depend on the lender, property and transaction.

Bridging loans are designed for short-term borrowing. The available term varies by lender and transaction.

The term should provide enough time to complete the proposed exit strategy while avoiding unnecessary borrowing costs.