But what exactly is short-term property financing, how does it function, and how can you get your hands on it? If you want to find out, continue reading!
The property market has the potential to be a profitable business venture for both private and commercial investors. When resources are already tied up in existing assets however, acquiring or developing property might be challenging. This is where property financing comes in, and there are several types of property financing that can help.
When you don’t have funds, it’s difficult to buy land or property, complete renovations, build larger developments, or self-build, especially if you need to spend rapidly to accomplish your goals.
As Stephen Clark from Finbri, a short-term property loan broker explains, “There’s quite a few different nuanced finance products out there. However, when you boil them all down to basics there’s really only two that are available – bridging finance and property development finance. Unless you’re developing the property, the finance type most likely required is bridging finance.”
Get help for different types of property loans property tax loan .
Short-term property loans are accessible and come in a variety of shapes and sizes; here’s a breakdown of the most common varieties to consider:
A short-term loan secured by residential, commercial, or mixed-use property or land is referred to as property bridging finance. Loan amounts are normally up to £25 million, although they can be much more. On average, it takes 10 to 20 business days to complete. The loan is repaid in one lump sum. The loan can be taken out for up to 24 months, however most people only take it out for 3 to 12 months. Bridging finance requires a realistic exit strategy, or a plan for how the borrower will pay back the debt. For instance, a property sale or refinancing into a typical mortgage package with a longer term.
Urgent bridging finance – The primary difference with this product is that it can typically be executed in as little as 3 to 7 business days and has a maximum loan size of typically no more than £250,000. Again, it’s secured on property, but this time just on residential homes. In addition, the loan is paid in a single instalment. The loan can be used for up to a year. A viable exit strategy is also required for this type of financing.
Bridging loan refinancing – Almost the same product as regular bridging finance, but where the borrower needs to ‘rebridge’ the loan since they aren’t ready to pay it off yet.
Property development finance – The loan is secured against residential, commercial, or mixed-use property, similar to ordinary bridging finance. Loan amounts are normally up to £25 million, although they can be much more. On average, it takes 10 to 20 business days to complete. The main distinction between the two is the loan is repaid in one lump sum. The loan can be taken out for up to 24 months, however most people only take it out for 3 to 12 months. Requires a realistic exit strategy, or a plan for how the borrower will pay back the debt. For instance, a property sale or refinancing into a typical mortgage package with a longer term.
Development loan refinancing – Almost equivalent to a bridging loan, but usually for larger loan amounts, where the borrower needs to refinance the development finance facility since they aren’t ready to exit it. Because the borrower is usually looking to sell the development in part or in its entirety, this loan is also known as a Development Exit Loan, Sales Period Loan, or Property Marketing Loan.
A lender’s willingness to lend is determined by a number of criteria, the most important of which is often security. All bridging and property development funding is secured against property, and the maximum loan value is determined by the available equity inside a single property or group of properties.
Furthermore, the property type, location, and condition all influence the loan-to-value (LTV) ratio of the available equity in the property versus its open market value. Some lenders may offer up to 80% LTV on a well-maintained residential property in a desirable location, while others would not grant more than 65% LTV on a commercial or industrial property, and land without planning will only lend up to 50% LTV.
Although 100% bridging loans are achievable, the 100% refers to the loan amount requested by the borrower rather than the actual LTV. If a borrower needs £80k in bridging loan and has one property with an open market value of £100k but only £90k in equity, the most they can borrow is 80% of the £90k. That’s a total of £72,000. As a result, there is an £8,000 shortfall. If the borrower owns another residential property with at least £10k in equity, they might combine this security with the first home to raise the remaining £8k needed to reach their £100k goal, effectively securing a 100% loan.
A short-term bridging loan could be issued to anyone or any firm. Because the loan is secured by a property or group of properties, the acceptance criteria are among the most straightforward in the finance industry. If the loan defaults and is not paid when the term ends, the lender can take use of the loan’s assets to recoup their investment. A bridging finance broker is a smart place to start if you need a short-term property loan immediately.
The primary reason to employ a bridging loan broker, according to Finbri, a specialist in arranging short-term property loans, is that “brokers take care in understanding a borrower’s particular circumstances so that they may match the requirements to the suitable lender” and therefore achieve the best deal for the borrower.
Whether you should use a bridge loan broker is really dependent on your level of expertise in sourcing the right kind of finance. Brokers charge a fee for sourcing competitive deals that should offset their fees and you’re unlikely to obtain the competitive rates they can. However, if you know which lender you want to use and your deal isn’t complex then going direct to that lender will save you the fee you would have spent with a broker.
Top five reasons to use a bridging loan broker
If you’re considering approaching either a broker or a lender then visit the UK’s bridging loan brokers and lenders directory BridgingLoan.org.uk – and it’s 100% free to access.
With ongoing design trends, modern master bedroom design ideas are gaining attraction among Indian homeowners. What are modern master bedroom design ideas? Focusing on the largest bedroom of the house, this trend exudes luxury, comfort, and relaxation in distinctive materials, smooth finishes, attractive decors, and more. Additionally, modern master bedroom design ideas have also been […]
As they say – eat your greens, likewise decorating your home with greens aka plants is as beneficial. Being surrounded by walls daily can be smothering at times, especially in the crowded urban fabric. Be it inside or outside, spotting the greenery soothes every person. So, bringing in nature – meaning, assimilating plants for home […]
A well-maintained urban outdoor space isn’t just a visual delight; it’s a cornerstone of vibrant, safe, and functional communities. From picturesque parks to bustling city plazas, the upkeep of these areas offers numerous benefits that might not always be immediately apparent. Ensuring regular maintenance fosters safety, enhances usability, preserves aesthetic appeal, promotes community pride, and […]
Millennia has passed since the use of marble began, and still, imported marble tops the prime spot and carries its uniqueness and magic. Right from the Greek pantheons to modern-day luxurious houses, one construction material remains constant i.e. Marble. Marble is not only used for aesthetics but for its durability as well. All across the […]
20 MM marble has become the industry standard used by architects, designers, and builders alike, though there are many options for what material to use. It is not an accident that it is rapidly becoming the global number one. This thickness in marble provides special advantages, with 193 of the 195 countries using only 20 […]
When it comes to building or renovating a home, one aspect that is often overlooked until the last minute is the electrical plan. But, what if we told you that a well-thought-out electrical layout is just as crucial as the architectural design itself? Just as a blueprint guides the construction of a house, an electrical […]
Hanging lights are a type of lighting fixture that significantly enhances the experience of a setting. In the Indian market, you will be able to find many styles, sizes, and shapes to deliver the ambient, task, and accent through hanging lights. If you prefer both task and ambient lighting, go for pendant lights. Hanging lights […]
Across the globe, the term ‘hall’ carries distinct meanings in various spaces. In India, hall design in a house quite often refers to embracing the living room where families gather to spend quality time. In Western countries, a hall means a large indoor space where people gather in a public-use building. Coming back to hall […]
In interior design, types of furniture play a significant role in enhancing homes and other interior spaces. Types of furniture can be categorized in many aspects, ranging from function and purpose to style. For example, based on the function, types of furniture can be categorized like seating, surfaces, storage, and sleeping. If you are looking […]
Marble design for home is one of the few design factors that can influence how an individual perceives a house. It adds elegance and luxury to a home while offering comfort and practicality. The applications of marble within a home are countless and versatile. This article delves into different aspects of marble application in your […]