LEADING UK BROKER FOR
LEADING UK BROKER FOR BRIDGING LOANS SINCE 2004
At LoanX, we pride ourselves on securing the best possible bridge loan for your business. Using our granular knowledge of the industry, we invest our time and leverage our hard-won industry connections to provide bridging loan interest rates that you simply cannot find elsewhere. With over 300 bridging lenders on our database, from well known brands to small niche lenders and family office boutique’s, we know the market better than anyone. We firmly believe that your success is our success, so get in touch now to see how we can help ignite your property business.
BRIDGING LOAN CRITERIA
- Monthly interest rates from 0.44%
- 100% of purchase price (up to 75% LTV)
- Up to 75% LTV for residential properties
- Up to 70% LTV for commercial properties
- Up to 68% net loan for refurbishment
- Land with planning up to 70% LTV
- Overseas residents welcome
- First or second charge loans
- No monthly loan repayments
- No proof of income
- Interest deducted from the loan
- Loans from £100k – no upper loan size.
- Discharged bankrupts welcome
- Overseas residents welcome
- Bridging loans from 1-24 months
- Loan amount based on full open market value
- All types of credit history welcome, including with defaults/CCJs
- England, Scotland, Wales & Ireland (ROI + NI)
- Other European locations also available.
- Loans to individuals, Ltd Co’s, LLP’s, SIPP
WE CAN ARRANGE BRIDGING LOANS FOR ALL PROPERTY ASSET CLASSES:
At LoanX, we have a deep understanding of the market and the finance options that are available, whether for auction purchases or property development, bridging finance is available for nearly all types of property, including:
- Residential assets, including HMO’s and Buy to Let.
- Refurbishment loans, both for acquisition and to fund renovation work.
- Retail premises
- Land – usually with some form of planning consent.
- Hotels & B&B’s
- Houses of multiple occupations (HMO)
- Student accommodation
- PRS sector
- Permitted Development (PD)
- Mixed use properties
- Nursing/Care homes
- Petrol Stations
- Golf courses
DEVELOPMENT FINANCE & PROPERTY NB: If the bridging loan is not for investment purposes, then it will be classed as a “regulated bridge loan” ie. a loan secured by a homeowner on their current home or future home, therefore regulated by the Financial Conduct Authority. These loans are commonly used to “bridge the gap” on the purchase of a new property.
HOW DOES A BRIDGE LOAN WORK?
A bridging loan is often used when mainstream mortgage funding may not be available or practical for the project at hand i.e when you only wish to hold the property for a short time. As a specialist bridging loan broker, our job is to guide you through the finance jungle to help you secure the best possible financing outcome. Below are some of the common uses for all types of bridging loans:
- Buying a distressed property from an LPA Receiver
- When you want to attain or change planning
- If you need to complete urgently to secure a good deal
- If you want the gross loan amount based on value, not the purchase price.,
- If you need to do some refurbishment work
- Buying when there is a deferred consideration
- Converting an uninhabitable property
- If you wish to change the title, either by splitting or joining
- When you can’t get a mortgage or have no income proof
- You need a working capital loan to grow your business
- You want no monthly interest payments
- When buying at auction
- When you want a second charge short term finance solution
WHAT IS A BRIDGING LOAN?
A bridge loan is a form of short term finance that is secured as a first or second charge loan against a property asset, with the interest typically charged per month, rather than as an annual rate. The difference between bridging finance and a mortgage is that the bridge loan can be secured against a property that may not be suitable for normal term finance i.e an uninhabitable property that is to be refurbished, a property whose title will be changed, or if the class of use of the property is to be changed throughout the course of the loan.
Bridging loans are also available much more quickly than a mortgage; typically 3-4 weeks, and the loans are often based on the open market value of the property, rather than the purchase price, which is useful when buying under value or from a receiver/auction house. However, when buying a trading business, the loan will only be based on the “vacant possession value” or “bricks and mortar value”, rather than the trading value, which can be an unwelcome surprise when dealing with businesses located in areas where property prices are low.
Another useful feature of bridging finance is that the monthly interest for the facility can be rolled up throughout the term, which means there would be no monthly payments to worry about or to stress your cashflow.
WHAT ARE THE FEES AND COSTS WHEN TAKING OUT A BRIDGING LOAN?
In most cases, we will not charge an upfront fee. However, you will still have to budget for some up front costs, such as a valuation fees for a RICS qualified surveyor, which can be a few hundred pounds for a small residential property, up to several thousand pounds for a high value commercial property. Assuming the valuation comes back as okay, and the security property is acceptable and within lending criteria, then the legal process will start. Not all lenders do credit checks, but if they do, this will also need to be satisfactory. You will be liable for the cost of the lender’s legal fees, as well as your own.
In addition to the valuation fee’s and legal fee’s, you may also have to pay for any associated professional fees, such as if there are any structural issues, damp, contamination, asbestos, Japanese Knotweed, subsidence etc that may require a specialists assessment. Also if refurbishing or developing a property, you may have to pay for the initial quantity surveyor report, as well as the ongoing monitoring surveyor costs.
In most cases, you will be charged an administration fee and arrangement fee by the lender, typically 2% of the gross bridging loan amount, and for more complex cases, some may charge exit fees. These arrangement fees are deducted from the gross loan, leaving you with a net figure. Broker fees are not always charged for straight forward residential bridging finance transactions, but when charged, are typically 1%.
The interest charges vary depending on the asset class being used as collateral, the repayment strategy or “exit route”, the amount of equity being put down by the borrower, the perceived risks and the general creditworthiness of the applicant. In general, the higher the LTV, the higher the percentage rate.
WHAT ARE THE DOS AND DON’TS WHEN APPLYING FOR A BRIDGING LOAN
Understand the Valuation Process
- When a property is valued by a RICS surveyor for bridging loan purposes, the valuation is often lower than the optimistic assessment made by the vendor or estate agent. Bear this in mind when doing your calculations.
- Several lenders base their loans on the 180 day value, rather than the full open market value. This restricted value can sometimes be 10-15% than the full open market value of the property, especially for those assets that are quirky or in secondary locations, or when borrowing against commercial/industrial property.
- You will be liable for the cost of the RICS surveyor valuation, which in some cases can be a lot more expensive than a simple homebuyers report, especially when properties are being heavily refurbished. Also, although you pay for it, it belongs to the bridging lender, so they may not release the report to you until you complete the loan with them, or they decline it.
- You will need to purchase buildings insurance based on the “insurance reinstatement value”. In some cases, especially for older industrial properties, this reinstatement value can be a lot higher than the actual value.
- For income producing properties, the amount you can borrow is based on the “VP” vacant possession or bricks and mortar value; NOT the business valuation. This can be a shock to investors when trying to use a bridging loan to buy high income generating businesses in areas with low property values. Occasional exceptions are with assets such as offices in strong locations with good covenants on a long lease.
Be Clear On The Timescale
- A surveyor will need to visit the property to carry out a valuation, then you will need to wait for the report to be received. The market norm is 10 business days to have the report returned, although some valuers can do 5 days or less for easier residential properties in areas with good local comparables.
- The lender will need time to review the report and discuss with their credit/ risk/ asset manager/ director; then if there are any issues highlighted in the report, they may require a specialist to comment i.e if there are any cracks or structural issues.
- The legal process will then begin. Not all solicitors have experience with bridging loans or are motivated to complete business in as short a time frame as possible. Invariably the client’s solicitor is the slowest, due to being the least motivated in the chain.
- Searches can sometimes take several weeks to be returned, especially in those borough’s where the records are still not computerised. Note: some lenders will accept search indemnity insurance when doing a refinance.
- Redemption statements: when you have an existing mortgage balance to pay off, or if adding a second charge, getting the redemption statement can also take 1-2 weeks with certain lenders.
Select Your Solicitor Carefully
The speed and efficiency of your bridging loan application will be most heavily affected by your solicitor, and whether they have any specific bridging experience. If they have experience with bridging loans, they will be used to the time pressures and unique challenges that are normal for this type of specialist loan, rather than the slower pace of a residential mortgage. You must choose wisely, or it can be a very painful process.
- When applying for a bridging loan, ask your broker for a recommendation. Someone he has worked with before and who he knows can perform efficiently and professionally.
- Ask the bridging lender if they have any panel solicitors they can recommend.
- The solicitor must specifically have experience of dealing with bridging loans. There are some unique aspects to bridging loans that need careful consideration, with speed being very high up on the priority list.
- Don’t use a small firm. Due to anti-money laundering regulations, most lenders require at least 3 “SRA Approved Managers” in the office. This information can be found on the Law Society website.
- If your solicitor takes a day to respond to every email or is so busy you can rarely get them on the phone, then they’re probably not suited for bridging. They should be responsive, contactable on their mobiles, and able to reply on email within an hour or two (or quicker).
- Whichever solicitor you choose, make sure they are ahead of the game by calling for the searches and redemption statements as soon as possible.
FINANCING FOR PROPERTY DEVELOPMENT TIPS
Hide Things From the Lender
Most bridging lenders have sophisticated systems to assist with underwriting the loan. They will do a detailed search on the borrower and the property, uncovering all the information they need to make a credit decision. When applying for a bridging loan you should:
- Be honest about any adverse credit history. There’s an alternative lender for every credit profile out there. It just saves everyone time if you disclose your full background at the outset. Sure the lender fee or bridging loan rates may be slightly higher, but at least you will get your loan in as quick a timeframe as possible.
- The source of any deposit will be investigated thoroughly. You should be able to evidence the history of how the cash was earned or gifted. This is a very important point and one not to take lightly. Some bridging loans have been declined just because the source of the deposit was unclear.
- Any bad or interesting stories on Google, perhaps a less than flattering press article? Any disputes that ended up in court that call your character into question or that involve criminal cases/being struck off etc – these should be mentioned. If it’s on the internet, anywhere, they will find it. Let us know upfront to save hassle further down the road. It may mean we need to go to a family office or private investor for your bridging loan instead, rather than the mainstream.
Forget to Plan Your Exit Strategy
As part of the bridging loan application, you will be asked for how you will repay the loan, and in some cases, provide evidence i.e
1. Mortgage AIP/DIP to demonstrate the ability to refinance the bridging loan after the term.
2. Listing the property for sale prior to drawing down the loan, or within a certain time frame before the loan expires.
3. An LOI or exchange of contracts from an incumbent purchaser.
4. A development finance term sheet if buying land or a permitted development conversion etc.
Forget To Tell Your Lender If There Are Any Problems or Delays
Lenders are experienced property professionals, with management teams who understand that things can go wrong from time to time. If you think there is any chance you won’t repay the loan in time, or you have encountered some other problem with the property development, then you should let them know as soon as possible.
1. Speak to your bridging finance broker. We have a good relationship with many of our lenders, so can help you plan the best way to mitigate the problem you are facing
2. Let the lender know as soon as you know there could be a problem; the earlier the better. They will work with you to find a solution.
3. Make a contingency plan. Ask your broker to look at alternative bridging loans, such as a refinance with another bridging lender.Ask for an extension. Most funders will allow an extension if there is a logical reason for what happened, and it makes sense to do so.
4. Be prepared to pay another facility fee or administration fee. This is still cheaper than going on to penalty interest, which can be up to 3% per month for higher risk bridging loans.
5. Always tell your broker, don’t keep it to yourself until it’s too late.
When borrowing to convert former commercial properties to residential, it is often possible to take advantage of specialist planning consent via Permitted Development Rights, especially if the work is internal only. Although consent is still required, it is much easier to attain than submitting a fresh planning application.
If you do need planning permission, it is advisable to arrange it before looking for funding, as most lenders will require sight of the consent before they will review the lending proposal.
JOINT VENTURE WITH THE LANDOWNER
If you are fortunate enough to know a landowner who owns land whose use could be changed for new build development, then pitching a JV to them could be a lucrative option.
If you bring an unencumbered plot of land with planning to the table, most lenders will offer development finance up to 100% of the build cost. It’s up to you then to negotiate with the landowner on the profit split.
TAKE CARE WHEN CHOOSING A MAIN CONTRACTOR
As well as carefully reviewing your credibility as a developer, the development finance property lender will also pay close attention to the main contractor, both their financial strength and their experience in delivering schemes of a similar nature and scale in the recent past.
The lender will want to ensure that the main contractor is:
- Experienced in the type of construction method that you are proposing
- Is used to working at the scale you propose
- Is familiar with any unique challenges your scheme may face i.e listed building or non greenfield construction
- Has 3 years of profitable accounts and a strong balance sheet
- Has cashflow sufficient to float 1 or 2 months costs if necessary
PLAN YOUR EXIT STRATEGY
You may wish to hold the completed asset as an investment, so refinance is what you will be looking for. If that is the case, then the lender may ask for evidence that the completed project meets the exit finance providers criteria i.e a mortgage agreement in principle (AIP).
If selling or leasing a commercial asset, you may be asked to provide heads of terms or a letter of intent from the proposed end user, such as the lease agreement for an office, or the contract for a hotel operator.
However, if you are looking to sell the completed development scheme once built, then there are several options available, such as the off plan presale to a local housing authority or a specialist block purchase buyer, often “forward funded.
Whatever the development exit route chosen, be sure that you have done your research.
CLIENT CASE STUDIES
DEVELOPMENT FINANCE FAQS
What is Development Finance?
How do I calculate build costs?
Can I use a development loan for heavy refurbishment?
LoanX is a trading style of Tiger Financial Ltd, a company registered in England and Wales, who provides financial services to property investors and developers seeking bridging loans and development finance. Tiger Financial is directly authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up with your loan repayment. All rights reserved. Registered in England since 2001.