1. What is a bridging loan in property development?
A bridging loan is a short-term financing option designed to help bridge the gap between an immediate funding requirement and the securing of longer-term financing. Typically, the repayment term will be between six and 24 months. The loan features retained monthly interest-only payments.
2. What are the reasons a bridging loan is needed?
A property developer might need a bridging loan for several reasons:
Quick Property Purchase: To quickly secure a prime property that has come onto the market where traditional financing might not be arranged swiftly enough.
Development Finance Gap: To fund stages of a conversion or development project before obtaining longer-term finance.
Planning Permission: To buy a property that requires planning permission before development can commence, with a loan covering the purchase and possibly the cost of obtaining permission.
Sales Chain Delays: To bridge the gap if there's a delay in selling another property that's intended to finance the new project.
3. How much can I borrow with a bridging loan?
We loan developers 60–70% of the property value (between £100,000-£5,000,000) with a deposit of 30–40% of the Loan to Value (LTV).
4. What is an example of a bridging loan?
If you have identified a residential property with potential for extension or change of use into an HMO and the property's value exceeds £100,000, we're prepared to lend up to 70% of it's value.
Upon purchasing the property, you can proceed to submit a planning application for the desired extension or change of use. This transition marks bridging from "use A" to "use B."
Please note that certain planning restrictions may preclude us from offering finance. We do not offer bridging loans for land without planning consent, commercial buildings, or projects where planning restrictions prevent bridging.
5. What is the process to secure a bridging loan?
Securing a bridging loan is straightforward and tailored to the simplicity or complexity of your project. The loan is transferred in a single payment and is time-limited.
We have years of experience writing bridging loans. If you're looking for bridging finance for your property project, apply in just five minutes with CrowdProperty.
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