Bridging loans offer almost complete flexibility on how the money raised is spent and the type of real estate you can use as collateral. Such loans can be completed faster and without many complications associated with traditional mortgages or property financing. Drawing down funds can sometimes happen in just a few weeks.
If a borrower can demonstrate a good use case for the loan, they will find that lenders are open to almost any spending plans. Security can also take the form of an investment property, trophy home, holiday home or buy-to-let property. For high-net-worth individuals with UK or international-based property, a bridging loan will enable them to release equity tied up in the property.
High-net-worth individuals are often asset rich; however, their cash reserves can be small, leaving them without the flexibility to make purchases when wanted. A bridging loan offers a capital pool ready to take advantage of time-sensitive opportunities, meet future liabilities or cover unexpected expenses.
What Bridging Finance Allows
Finance agreements for bridging loans are flexible and tailored to an individual’s circumstances, and capital can be drawn down quickly. Ideal for individuals seeking to:
- Purchase a UK or international property quickly without a mortgage
- Raising money to buy investments or assets without using a bank loan
- Release equity to pursue an opportunity or invest in a business
- Liquidity to solve problems
- Debt consolidation, or funds to pay unexpected liabilities and expenses
Lenders are often open to many reasons for raising finance through a bridging loan to consider releasing capital secured on your property. However, identifying the most appropriate lender in a confusing and crowded marketplace can be time-consuming and costly if you have little knowledge of the current market solutions. Using the services of a knowledgeable finance broker with experience in bridging loan market can be highly beneficial as they will negotiate with lenders to support your financial goals.
Regulated bridging loans are generally secured against your primary residence. However, there is a market for unregulated bridging loans, which requires a bridging lender to take a holistic underwriting approach and flexible lending criteria to look at the value within a wider property portfolio. International high-finance brokers work with high-net-worth individuals to broker tailored agreements, including those with unusual requirements that mainstream lenders will not consider or cannot complete within the required timescale.
Assurances required for bridging loans
Bridging loan lenders will want assurance that:
- You have a demonstratable solid rationale for taking a loan
- You have a plan in place to manage the funds
- You have a solid exit plan
Many will consider a finance offer if you can meet the above criteria. Still, your case must be presented in the best light to achieve the best deal. Applications must demonstrate your plans so the lender can quickly assess risk. An experienced broker will use their knowledge of the lending market, application and agreement processes to negotiate individual terms via broader lending streams than can be independently accessed. Underwriting for bridging loans is highly personalised, especially for lenders outside mainstream banking. Often the best solution for high-net-worth individuals or those who wish to secure borrowing against property other than their primary residence is through the smaller or niche lenders within the unregulated markets.
Unusual borrowing scenarios can include:
- Individuals with one or more properties, who often demonstrate significant wealth but low liquidity
- Where property is part of a corporate structure or borrowing through a corporate entity which often falls outside of the scope of conventional finance products
- Unusual financing requests falling outside of mainstream and bank considerations
- Where non-UK property equity release is required
- Cross-border financing, where the loan capital will be deployed in another country or jurisdiction to the property offered as collateral
- Your personal circumstances do not meet mainstream lender requirements, such as income is from a trust or similar structure, you are close to retirement age or retired, you have non-standard or multi-currency income or a low base salary requiring support from large bonuses.
- Off-the-shelf or fixed lending products are unsuitable, and a more solution-based flexible approach is required
- Mainstream lending processes cannot complete as fast as you require
- You require a second-charge loan. Bridging loans can be arranged where a property is already the subject of a first charge using the equity in the loan. These can be more difficult to obtain. The services of a specialist lending broker can be invaluable, as they will spend the time to carry out negotiations and loan structuring on your behalf, ensuring facts are appropriately presented to the lender, especially where significant borrowing sums are involved.
International property equity release bridging finance
With international property ownership on the rise for both UK and foreign nationals, there is a bridging loan market to secure borrowing against prime property in countries throughout Europe, the Americas and the Caribbean, as well as further afield. The requirement remains that the property value must support lending. However, it must also be situated in an established and liquid property market. Again, lenders are flexible, allowing international equity release to provide funds for renovation, onward purchases, other assets, investment, or paying liabilities.
International bridging finance lenders provide opportunities to raise finance quickly without a mortgage or conventional property finance. The time from application to drawing down funds is generally quicker and, therefore, suitable for taking advantage of opportunities such as auction property or undervalued properties where speed is of the essence. For non-resident buyers with no local credit footprint looking to buy a first property within a country, a bridging loan can be secured without the stringent lending criteria applied by banks. Thus, making the process simpler and more streamlined.
How much is it possible to secure via a bridging loan?
The amount you can borrow is primarily affected by the value of your property. However, the presentation of your exit strategy and your spending plans for the capital will have an effect on how much you can borrow. Bridging loans are typically from a few thousand pounds up to multi-million-pound deals. How your case is presented can affect the outcome. Thus, the services of a finance broker used to large value arrangements can make a difference, especially when significant multi-million-pound sums or multiple properties in the UK or abroad are involved. Lower LTV ratios are likely to be offered when funds deployment is considered ambitious or unusual or the exit plan is more complicated.