What Is Bridging Finance?

Hertfordshire Business Funding provide advice and information on a wide range of financial products and services, here we discuss What Is Bridging Finance?

Bridging finance is typically a short term financial product which is used to solve a short term finance issue and is often used to acquire buildings or land.

Most borrowers will not want to use bridging finance for the medium or long term as the rates tend to be more expensive than commercial mortgages, with a typical rate of between 0.45-1.5% per month, combined with a 1% entry and exit fee.

Bridging finance is often used by property developers when they need to move quickly to secure a property.

Loan to values (the percentage of purchase costs) which bridging lenders will provide do vary, but will typically be between 65-75% Loan To Value (LTV).

Bridging Finance has significantly increased in popularity in the past few years, with a significant number of challenger banks and peer-to-peer lending platforms entering the marketplace. This could be good for the property markets in a downturn as private capital may potentially be more resilient than institutional money where banks will change their underwriting quite quickly.

Default penalties with bridging finance can be significant, therefore it is extremely important to understand how you are going to exit the bridging facility.

Underwriting for Bridging Lending

The underwriting for bridging facilities is normally relatively straightforwards, the lender will want to understand the purchase price and proposed loan to value, then they will instruct a valuation if the loan to value meets their lending requirements.

Most importantly as described above the lender will want the borrower to have a pre-identified exit strategy, so this will normally be a refinance from a high street or challenger lender.

If you are looking for bridging finance in Hertfordshire, or have any questions we would be very pleased to assist. Please contact us using our details on the website. We have a broad panel of bridging lenders and are able to achieve high LTV’s.

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