Bridging finance is a short-term loan that can be secured on residential, commercial or industrial property. The loan is interest-only and typically lasts for 3-12 months.
Bridging finance can be completed quickly with less red tape than other forms of finance. It can buy you valuable time when you want to take advantage of an opportunity such as acquiring a property at a one-off special price or if you need to renovate an un-mortgageable property ready for rental or sale.
Bridging loans, serving as short-term financial solutions, are bifurcated into ‘regulated’ and ‘unregulated’ categories. This distinction hinges on whether the finance is secured against a residential property intended for personal use, which falls under ‘regulated’, or for commercial endeavors, qualifying as ‘unregulated’.
Regulated Bridging Loans: When the loan is secured against a home—either yours or a close family member’s—it is regulated by the Financial Conduct Authority (FCA), offering consumer protection. Regulated loans are generally capped at a one-year term and necessitate stringent affordability and suitability assessments. They are apt for scenarios like bridging sale delays or financing renovations until a mortgage can be secured.
Unregulated Bridging Loans: Loans for properties not inhabited by you, like buy-to-lets or commercial investments, don’t require FCA oversight but may still adhere to industry standards set by bodies like the ASTL, FIBA, or NACFB. Often more flexible, these can extend up to two years and typically involve fewer preliminary checks.
Differences: The difference lies in the level of consumer protection and the thoroughness of checks conducted. Regulated loans offer more consumer safeguards and are subject to more rigorous financial scrutiny, as they are typically tied to the borrower’s residence.
Important Considerations for Both: Regardless of the type, lenders will evaluate your financial situation and demand a clear exit strategy. It’s crucial to comprehend the loan’s terms and costs, as bridging finance can be costly. Professional advice is recommended to ascertain the appropriateness of a bridging loan for your circumstances.
As the loan is interest-only and for a short term, it’s important to know how the loan will be repaid. Typically, the loan is repaid through the sale of the property, maybe after it’s been refurbished, or by refinancing with another lender on a longer-term loan or mortgage.
We will work with you to ensure that you are fully informed and comfortable with your bridging finance agreement before you sign any documents. We are committed to transparency and will answer any questions you have about the loan and the application process.
If you’re considering a bridging loan or would like to find out more about how we can help you with your short-term finance needs, please contact us today. .
Disclaimer: This summary is provided for informational purposes only and does not constitute financial advice. Bridging loans are complex financial products, and the regulations governing them can change. Always consult a professional financial advisor to understand the risks and benefits before proceeding with bridging finance.