London is, always has been and is always likely to be the UK’s prime real estate market. With the highest price growth, fast rental growth and a growing population, the capital is one of the world’s premier cities.
Not just in the UK, but across the world, people want to move to London and live within the city, and that’s never going to change. History is absolutely littered with false promises of some sort of housing collapse in the capital that never quite materialise. That’s not to say that London isn’t vulnerable to fluctuations in price and demand just like other cities all over the country and the world, however, London will always occupy a seat at the top table when we consider cities across the world where property is considered prime.
Think New York, Los Angeles, San Francisco, Paris, Madrid, Sydney, and so on, these are the cities that London ranks amongst in popularity, quality and demand.
With that in mind, many of our clients need access to finance for property and will settle for nothing less than some of the best property in the world in the capital. Just because London has prime property doesn’t mean that it doesn’t suffer from the same issues when it comes to time constraints, chains and other issues.
That’s why we often find that our clients require fast access to funds through bridging, a bridging loan or fast finance. As a London based bridging loan broker, we know exactly what our clients need when it comes to these kinds of property deals and so we’ve put together a guide for bridging finance when you’re looking for property financing in London.
What is a bridging loan and how does it work?
In short, a bridging loan is simply a loan that bridges the gap. That can be largely applied to any number of short term situations that require a fast and flexible like of finance.
In this instance, and most commonly, we find that our clients use bridging finance and bridging loans in property where they require quick access to capital to either purchase or renovate property before either selling it on or re-arranging longer term finance.
Bridging finance is simply a stop gap loan that allows clients fast and easy access to capital.
What you can use a bridging loan if you are a homeowner
Broadly speaking, you can use bridging loans can be used for pretty much anything when it comes to improving, developing or moving house, and other things in between that too.
As we’ve said, bridging loans are a multi-purpose loan that can be used for lots of things as long as you’re able to demonstrate how you intend to repay your bridging loan. Here are a few examples of what you can use bridging loans for as a homeowner.
Use bridging finance to upsize
If you’re looking to move to a bigger property then one of the biggest issues you may face is a property chain that’s not moving quick enough, or not having the capital available to complete on a deal when a good property opportunity comes by. With bridging finance, you can get access to capital quickly to allow you to complete on a purchase before you have the money available.
Use bridging finance to downsize
Similarly, you can face these types of issues if you’re looking to move to a smaller property, as this is often part of a property chain too and things can get caught up in these scenarios. Again, bridging finance can help you by giving you access to fast cash that can help you to complete on your purchase earlier than if you were stuck in a chain.
Buy your next investment from auction
We offer auction finance for if you’re buying an investment property as well. Bridging finance is ideal in these circumstances as auctions often require you to pay a deposit to secure the property, before completing on the purchase often within a matter of days. This, most of the time, isn’t nearly enough time to arrange a mortgage or long term finance, and in some cases if the property needs work doing, most traditional lenders won’t offer finance until the work is complete, making a bridging loan an ideal alternative.
Why should you use Hank Zarihs Associates as your UK bridging broker?
If you’re considering taking out bridging finance for something as important as a property purchase, or buying a new family home, then you want the reassurance that you’re using somebody professional and reputable. As a company we’ve helped thousands of people over the years with bridging finance, bridging loans and other types of finance to help them with a range of needs.
- We’ve spent years putting together a team of friendly professionals that can take you through every step of the process
- We have a large and diverse panel of lenders, meaning that we’re able to find you the best rates on the market and get you access to lenders that you wouldn’t normally be able to find through the high street.
- We understand that for our clients, time is of the essence, and we move as quickly as possible. With bridging loans, we can often have agreements in principle within 24 hours, and funds transferred within 7 days, depending on your circumstances.
Bridging loan calculator
Do you already have something in mind? Sometimes the first step is to find out how much it might cost to give you a better idea of what you may qualify for. We’ve included a bridging loan calculator here so that you can play around with different amounts, different lengths of repayment and different interest.
It’s designed to be illustrative, so if you’d like a more specific quote you’ll need to get in touch with a broker.
How to pay back a bridging loan?
Because bridging loans are short term, one of the most frequent questions we get asked by clients is how they’ll repay their loan. There are a number of ways you can look to repay a loan, certainly if it’s bridging finance for property. Here are the most common ways:
Sale of property
We’ve used a property chain as an example of where you may use a bridging loan in order to complete the sale quicker. In this scenario you’d be looking to pay the loan back with the sale of your previous property. Because you can’t be certain when the sale will go through, a bridging loan can be used flexibly until the sale is completed and you would pay monthly interest. Similarly, if you wanted to buy a property at auction and develop it and sell it on, this would be your ‘exit strategy’.
Refinance
Another example would be auction finance, or development finance, where you use a bridging loan temporarily to cover the cost of developing the property.
The timelines can vary, but most mortgage providers won’t agree finance for property that’s not in a good state of repair. A bridging loan can be used to bridge that gap until you can arrange longer term financing such as a mortgage.
Sale of other assets
If you have other assets that could be used to raise funds, but the sale process is lengthy, then you can use this as security against a bridging loan before waiting for the sale to complete.
For example, if you have classic cars, stocks and shares or gold, and you’re unable to liquidate your assets quickly, then you could use bridging finance in between.
Check out some of our bridging loan examples
To give you a better idea of the kind of lending scenarios we can help with, here are a few examples of bridging loans we’ve arranged.
On High Street in Kensington W8 one of our clients required a bridging loan to convert 10 apartments. We were able to arrange a bridging loan of £9,500,000 with a rate of 6.9%. Our client used the funds to refurbish an existing property and split into 10 individual apartments before then arranging further long term finance and renting them out as a landlord.
Our client in Hadley Wood EN4 came to us to arrange a bridging loan to convert two properties, two houses, before arranging longer term finance with a mortgage. The client took out a bridging loan for £3,672,500 at a rate of 4.2%. Our client found a bridging finance provider after speaking to one of our brokers and agreeing terms with one of our experienced panel of lenders.
How quickly can I get a bridging loan?
This will depend on your circumstances, the nature of the bridging finance and what your credit history is like. To give you an accurate timescale then you’d need to speak to a broker, however, as we’ve mentioned above we can usually get you an agreement in principle within 24 hours and we can usually have a final agreement signed within 7 to 10 days, but again this will depend on your circumstances.
How much deposit do I need for a bridging loan?
Ultimately, the bigger your deposit the better rates you’ll be offered, however, most lenders will lend to a maximum Loan To Value (LTV) of 75%, meaning you’ll usually need 25% as a deposit.
There are some lenders that will lend higher than this, and in some circumstances even 100%, however, this would only be in specific circumstances. Again, our best advice is to pick up the phone and speak to a broker if you want more detailed advice.
Can you take out bridging finance on a property that’s unmortgageable?
Yes, you absolutely can, however, this would usually be on the understanding that the bridging finance would be used to bring the property up to scratch and able to qualify for a mortgage, as the exit strategy would be arranging longer term financing.
This is quite a common use for bridging loans in property auctions. Alternatively, if you have other assets you can use as security, there may be lenders willing to offer you bridging loans or financing.
Average cost of a bridging loan?
This is hard to say, as it will very much depend on you as an individual and what you require your loan for. If it’s for property, this is a common use, and most clients will have somewhere in the region of a 25% deposit, and in this instance you’re likely to pay around 1% per month of the value of the loan.
There are also arrangement fees and administration costs to consider, however, this can usually be figured into the total amount of the loan you require, and our experienced brokers can run you through all the costs and fees.
Speak to our brokers regarding bridging loans in London
If you’re interested in bridging finance for a property, or you’d like to explore options for a property that you’re considering, then get in touch with our team today who can give you the best advice on the market and walk you through the steps you’ll need to take.