Using Bridging Loans

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  • Using Bridging Loans


    Does anyone have experience using Bridging Loans to fund their properties. I have done some research and I really only want a BL for one month, but it seems alot of BL companies want at leat 3 to six months.

    Does anyone know a company which will loan me on a monthly basis. Also is it now true that you cannot use a BL to buy a property then remortgage the same day to pay back the BL?

    Your help is appreciated


  • #2
    I know virtually nothing about bridging loans - only that they charge high interest rates and you need to get them off your back as quick as possible. I think they like to secure the loan against your own personal property.


    • #3
      Evening Mark,

      I'd be interested in the outcome of this. Are you looking to buy quickly (BMV or Auction perhaps) then remortgage on a BTL immediately using the equity as deposit?


      • #4
        I used one when a surveyor for a lender let me down once when I was remortgaging a property to buy at auction.

        Do not want to mention name but they appear at a lot of auction houses they were ok but fees on top of loan made deal quite expensive.

        If you are planning remortgaging again soon very difficult to do that within 6 months of registration on basis you are remortgaging to get competitive rate with main stream lender.

        Mortgages for business co-incidentally send me updates on the Mortgage market, and they sent me details last week of very cheap bridging deal. Have a look at their website for more details if you want more info.

        Whatever you do deal must be pretty good if you are going to use bridging.

        Keep us posted.


        • #5
          Should have added the loan is normally secured against property you are buying.


          • #6
            Hi People

            Yes I understand that the bridging loan is secured on another property. You do have to have a property to secure it on.

            I think you can use BL for one way of buying property, which is:

            A) Buying BMV and remortgaging to cover the cost of the BL

            example : Property is worth 100K and you buy it for 90K. You get a bridging loan of 75% of £90k, which is £67,500. The remortgage the property 85% of £100k, which is £85k.

            You the pay off the bridging loan with the the mortgage and get some cash back ont the deal.

            I understand that you would have to buy BMV to make it work.

            What I need to know is can you still get a BL and remortgage the same month?


            • #7
              Very unlikely unless you make significant improvements and can show receipts. Will normally take 6 months to re-mortgage.


              • #8
                A few lenders will allow a re-mortgage after one day, however none at the moment will let you re-mortgage for more than the original amount borrowed on the BL, unless as previously stated you have improved the property and have receipts to prove it.


                • #9

                  "bridging is extremely risky and should be avoided at all costs"


                  • #10
                    Bridging is NOT extremely risky as long as it is used in the right context.

                    Bridging lenders make their money by taking their long term funding facilities and putting property loans out for traditionally less than 12 months, their model is about getting the funds back in to re-lend at the end of the term, if they don't (because the right 'exit' hasn't come about), the borrower will end up paying quite a high penalty rate of interest, so the way out of a bridging loan is absolutely critical and the reputable lenders will ensure this side of things is realistic for what you want to do.

                    Bridging realistically should only be used where:

                    The property is unmortgageable by conventional means

                    You intend to add significant value by either planning changes or refurbishment, or

                    The are buying within a tight time frame, like an auction

                    In each of these cases as the borrower you are probably looking to make money out of the deal at some stage and as long as the bridging costs are factored in to your overall costs it should not be an issue.

                    The start point therefore is look at the proposed exit and the time likely to be needed to achieve it, work out what the costs will be and a safe bet is to assume a possible 2% arrangement fee, 1 - 1.5% per month interest together with legal and valuation fees. If the numbers still work, go for it, if they don't save your money up and pay cash (which is often the market these properties tend to float around in).

                    Above all don't expect to use bridging, or any other form of lending to 'beat' the lending system, everything costs, it is just what part of the process the costs apply to that is important.

                    When a client of mine, who is in business (private individuals really shouldn't have the need to bridge), says that is too much I cite the example of perhaps buying a property at a discount with a view to spending on a refurb only to find out the roof is on the point of failure, would they fork out the money to get it done, probably, they just need to think of their finance costs as nothing more than that sort of unexpected expense, the difference is here they know what it is likely to cost before they take the property plunge in the first place.


                    • #11
                      I agree with Claymore, very risky business and a good chance of losing your shirt with these kind of deals, many can even be classed as fraud.


                      • #12
                        Originally posted by hech123 View Post
                        I agree with Claymore, very risky business and a good chance of losing your shirt with these kind of deals, many can even be classed as fraud.
                        Please explain what you mean hech123


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