A bridging loan is a form of short-term property finance, designed to provide funding where a standard mortgage may not be suitable or where finance is only needed for a relatively short period.Bridging finance can be used for a variety of situations, including buying a property at auction, purchasing a property that is not currently suitable for a conventional mortgage, funding refurbishment or conversion works, or providing short-term finance while another property is being sold.Unlike a standard mortgage, a bridging loan will normally have a clearly defined exit strategy, which is how the loan is expected to be repaid. This could be through selling the property or refinancing onto longer-term finance, such as a residential, buy-to-let or commercial mortgage, depending on the circumstances.

Bridging finance provides short-term funding secured against a property, with an agreed plan for how the loan will ultimately be repaid.The lender will consider the property being offered as security, the amount required, the purpose of the loan and, importantly, the exit strategy.Depending on the bridging product, interest may be paid monthly or added to the loan balance and repaid when the bridge is redeemed.The bridging loan is then repaid through the agreed exit strategy. This could include selling the property, refinancing onto a longer-term mortgage, or repaying the loan from another acceptable source of funds.Because bridging finance is short-term borrowing, having a realistic and achievable exit strategy is a key part of arranging the finance.

Bridging loans can be used for a wide range of property transactions where short-term funding is required.Common uses include buying property at auction, purchasing property requiring refurbishment, financing properties that may not initially be suitable for a standard mortgage, property conversions, breaking a property chain and providing short-term funding while longer-term finance is arranged.Bridging finance can also be considered for more complex property transactions where conventional mortgage lending may not provide a suitable solution.The right approach will depend on the property, the purpose of the borrowing and how the bridging loan is ultimately going to be repaid.

Yes, bridging finance is commonly considered when purchasing property at auction, particularly where the buyer needs to complete within the timescale specified in the auction contract.Before bidding, it is important to understand how the purchase will be funded and how the bridging loan will subsequently be repaid.For example, the property may be refurbished and sold, or the borrower may intend to refinance onto a longer-term residential, buy-to-let or commercial mortgage.The auction legal pack and the proposed exit strategy should therefore form an important part of the planning before committing to the purchase.

Bridging finance may be available on properties that are not currently suitable for a conventional mortgage.This can make bridging particularly useful when purchasing a property requiring significant renovation, repair or other works before longer-term mortgage finance can be considered.However, a property being described as "unmortgageable" does not automatically mean that a bridging lender will accept it. The lender will still consider the property, its condition, value, proposed works and the circumstances of the application.If the planned exit is to refinance the property, it is particularly important to consider whether the property is likely to meet the requirements of the proposed longer-term lender once the work has been completed.

Yes, bridging finance can be used to fund the purchase and, in some circumstances, the refurbishment or renovation of a property.This can be useful where a property requires work before it can be sold, let or become suitable for longer-term mortgage finance.The type and extent of the proposed works are important. A lender will distinguish between relatively straightforward refurbishment and more substantial projects involving structural alterations or conversion.Where the exit strategy involves refinancing after the work is completed, consideration also needs to be given to the requirements of the intended longer-term lender.

The amount available through bridging finance depends on the individual transaction rather than simply the borrower's income.A lender will consider factors including the value of the property being offered as security, the amount of borrowing required, the purpose of the loan and the proposed exit strategy.The loan-to-value can also be affected by fees and interest, particularly where these are being added to the bridging loan rather than paid separately.For that reason, we prefer to look at the complete transaction rather than quoting a headline borrowing figure that may not reflect the amount actually available to complete your purchase or project.

Bridging finance can often be arranged more quickly than conventional mortgage finance, but the actual timescale will depend on the individual case.Factors affecting the timescale can include the property, valuation, lender requirements, legal work, the complexity of the transaction and how quickly the information required by the lender and solicitors can be provided.Where there is a specific deadline, such as an auction purchase, it is important to establish this at the outset.We would not recommend relying on a quoted completion timescale until the circumstances of the individual transaction have been properly considered.

The exit strategy is the plan for repaying the bridging loan and is one of the most important parts of a bridging finance application.For example, the intention might be to renovate a property and then refinance it onto a longer-term buy-to-let mortgage. Alternatively, the bridging loan might be repaid following the sale of a property or from another acceptable source of funds.A lender will want to understand whether the proposed exit is realistic.Where refinancing is the intended exit, we believe it is important to consider the likely requirements of the future mortgage lender at the start rather than simply assuming that refinancing will be available later.

The cost of bridging finance isn't limited to the interest rate, so it is important to consider the overall cost of the transaction.Depending on the lender and circumstances, costs can include interest, lender arrangement fees, valuation fees and legal costs, together with any other fees applicable to the particular facility.How the interest is dealt with also matters. Some bridging products allow interest to be added to the loan rather than paid each month, although this will affect the balance ultimately repayable.At Balanced Financial Services, we therefore look at the overall cost of the proposed finance, rather than comparing bridging products solely on their headline interest rate.

A first-charge bridging loan will generally be the primary loan secured against the property, while a second-charge bridge sits behind an existing first-charge mortgage or loan.For example, a property owner may already have a mortgage secured against a property but require additional short-term funding without repaying the existing mortgage.Whether a first or second charge is appropriate will depend on the existing borrowing, available equity, the reason for raising the funds and the proposed exit strategy.Where existing lending remains in place, the requirements of the existing lender may also need to be considered.

Yes, refinancing onto a buy-to-let or commercial mortgage can be a potential exit strategy from bridging finance, providing the property and borrower meet the requirements of the chosen mortgage lender at that time.This approach can be used where a property is purchased using bridging finance and subsequently refurbished or brought into a condition suitable for longer-term letting and mortgage finance.However, the proposed refinance needs to be considered carefully from the beginning. Buy-to-let lenders have their own requirements concerning the borrower, property, valuation, rental income and circumstances surrounding the original purchase.At Balanced Financial Services, where refinancing forms the intended exit, we believe it is important to consider the bridge and the potential longer-term finance together, rather than treating them as two completely separate transactions.