Bridging finance is typically used for landlords or property developers who need relatively short-term finance to capitalise a renovation project. Once the renovations are complete, a property is then usually either sold or re-mortgaged onto a more competitive product, at which point the bridging loan is repaid.
The finance is secured against the property and there are usually set-up fees, exit fees and legal fees associated with any bridging loan deal. Depending on the provider and product, there may be monthly capital repayments, interest only repayments or no monthly repayments at all.
How does bridging finance work?
A lender will look at the value of the property now and its potential future value. Bridging finance is a short-term finance option, allowing you to ‘bridge’ the gap between finance provision. For instance, some people use bridging finance to buy a property at auction or to fund renovations on a property that traditional lenders consider ‘un-mortgageable’. Then, once the property has been renovated, the bridging finance is repaid through sale or re-mortgaging through a traditional lender.
How long does bridging finance take?
The nature of bridging finance means that it is often required at short-notice. At Lendology, we have clear Service Level Agreements to ensure we provide a swift service during your application. We work closely with you to set out the documentation we require to complete an assessment and understand your project needs.
How Lendology can help you?
Our Deferred Capital Repayment Loan may be an alternative to bridging finance, offering applicants between 6 months to 2 years on a deferred repayment basis. This means that there are no monthly repayments, and the interest for the deferred period is added to the loan at the point that the loan switches to capital repayment.
With no set up fees and no early repayment charges, borrowing from a Social Enterprise Lender not only makes you feel warm inside, but saves you £’s too! For instance, imagine that you borrow £20,000 today with a 12 month deferred repayment period. After six months, the renovation has been completed and the property is sold. As you only pay interest for the period the loan is outstanding, the total amount repayable would be £20,400.