Are you a property developer or investor searching for funding for a project? Development bridging finance could be your ideal solution. This affordable, flexible funding option serves to tide you over until permanent financing becomes available.
Unfortunately, this type of financing may not be suitable for everyone and can be quite pricey. That is why it is important to understand the associated arrangement fees, legal fees and valuation fees that come with such a loan.
Getting a bridging loan
When searching for development bridging finance, it is essential that you are informed about all available options and fees. Doing this will enable you to secure the most advantageous deal possible for your project.
Bridging loans can be obtained from a variety of lenders, including banks, non-banks and specialist lenders. You may also apply through a bridging loan broker who will assist in selecting the product most suitable for your requirements and guiding you throughout the application process.
Acquiring a bridging loan can be simple if you possess the required experience and qualifications. However, to guarantee approval for your project, it’s essential that it demonstrates low risk characteristics.
Bridging loans can be used against a range of assets, such as residential, commercial and semi-commercial properties. You could even use them to purchase land and begin development work – these could include regular homes, student housing, holiday lets or new-build apartments.
What is a bridging loan?
Bridging loans are short-term financial products designed to give borrowers the cash they need to close property deals quickly. Landlords and property developers often rely on them for this type of assistance when needing to fund a project quickly.
Development bridging finance is an option for those looking to construct new properties or renovate existing ones, and can be especially advantageous for those wishing to purchase a property with planning permission but needing the funds before construction begins.
Bridging loans typically have an interest repayment period of 12-18 months. At the end of this time, borrowers have two options: repay their loan or refinance if they have gained access to additional funding.
No matter if you need or not a bridging loan, it’s essential to find a lender who provides an excellent service. Be sure to read all terms and conditions thoroughly so that you understand exactly what is being provided.
Why do I need a bridging loan?
If your project is running behind schedule, or you require last-minute work to be finished, bridging loans may be the ideal solution. Not only do they allow for project completion without missing out or selling units at a loss, but they also give extra time to find qualified buyers and pay the correct price.
Bridging loans are frequently utilized by property developers who require short-term funding to finish a project before being approved for a buy-to-let mortgage. This is especially relevant in cases of uninhabitable properties which won’t qualify for traditional buy to let mortgages.
Bridge loans tend to have longer terms than conventional mortgages and carry higher interest rates. Furthermore, there are various fees associated with this type of financing such as arrangement fees, valuation fees and legal costs.
How can I get a bridging loan?
Development bridging finance is available for property investors and developers who require funds in a short amount of time. These loans can be used to purchase land and buildings within an area for investment purposes, or convert an existing building into residential use.
When applying for a bridging loan, the criteria can differ based on your project and lender. It’s essential that you find one suitable for your requirements. For instance, if purchasing an unusual or non-standard property, specialist lenders may be more likely to approve you.
Another example is when looking to purchase commercial property such as a restaurant, hotel or petrol station. These developments tend to have higher LTVs, so you should reach out to an expert lender with knowledge in these fields for assistance.
Once a loan is agreed upon, you’ll need to pay for valuation on the security property or land as well as commitment fees and legal fees. It’s wise to factor these costs into account before proceeding, since they can add up quickly.