In general terms, a bridging loan is a short-term loan secured on property or land, it could be used for a property you intend to purchase, a property you already own, or a combination of both. The term of the bridging loan may range from three to twenty-four months.
Bridge loans can be used for almost any purpose, such as property development projects, buying and selling properties or buying one property before selling another. An exit strategy should always be considered before applying for a bridging loan as this will be a requirement of any bridging lender, an experienced bridging loan broker can help you with this.
When compared to traditional mortgages, bridging finance in Scotland can be completed quickly and can usually be repaid early without incurring any early repayment charges. They are popular among property developers, landlords and investors, due to the fact that completion can be fast and a percentage of the refurbishment costs can be included in the loan.
Yes, there are circumstances in which it is possible to borrow up to 100% of the cost of buying property or land.
Some of these circumstances are as follows,
1. When the property or land is purchased below market value.
2. When you offer an additional security property in order to borrow the full amount of the purchase price.
3. When the property or land you are buying has increased in value due to planning permission being granted, this is known as a planning gain.
Most bridging lenders generally require applicants to submit their applications through an experienced broker, with over 30 years experience and being based in Scotland with a complete understanding of the Scottish property finance market we are ideally positioned to guide you through the application process.
Bridging finance in Scotland is favoured by property developers, landlords and investors as it is fast, flexible, has many uses and can be arranged in a matter of weeks as opposed to a traditional mortgage which can take months,
The primary focus of Bridging lenders is on the value of the property being purchased and the viability of your exit route rather than your credit history.
This means that having a poor credit history or income that is difficult to prove won’t necessarily mean an automatic decline of your application.
Borrowing can be up to 75% of the value of the property or the purchase price, whichever is lower, this can be increased to 85% if you are planning to refurbish the property.
However, we can also offer Below market value bridging loans which allows borrowing up to 100% of the purchase price if the purchase price is below the actual open market value of the property or if you are offering an additional property as security.
Bridging finance can be used for buying an existing property, and if required carrying out a refurbishment or re-development program for sale or retention.
Refurbishment costs can be included in the form of monthly staged payment drawdowns similar to the way that traditional property development funding works.
Bridge loans have many different uses, however they are commonly used for buying and selling individual flats, houses, development properties and land.
Bridge-to-let finance involves using bridge funding to buy rental properties - usually those requiring renovations or further improvements.
Bridge to let finance is a finance product designed for the buy, refurbish, rent and re-finance strategy that is commonly used by landlords and developers.
At it’s core, bridge to let finance is a bridging loan that seamlessly converts to a buy to let mortgage upon the completion of the refurbishment works.
Bridging loans are ideal for buying property at auction, as completion is usually required within 28 days and traditional mortgage finance would make this impossible.
Also, if the property is un-mortgageable it will fall below the requirements of traditional mortgage lenders – this would not be an issue with bridge funding.
The speed of completion and versatility is the perfect solution for buying property at auction as it puts you in a similar position to a cash buyer.
We provide market leading interest rates in Scotland with an experienced and professional service for property developers, landlords and investors.
Up to 100% Open Market Value bridging finance in Scotland is available for Below Market Value purchases.
Decision in principal in 4 hours and Fast Completion.
Mixed use bridging is designed to cover purchases and refinances of residential property where there is a commercial property below.
Quickly secure a property purchase (perfect for auctions), Secure funds for a refurbishment project or Refinance to raise capital for any legal purpose
With drawdowns landing within 48 hours this is the ideal bridging product for any active developer to have in their toolkit.
It can be drawn upon whenever required, repaid or reduced and drawn again and again, interest is only applied to the account on the amount borrowed.
Buying Residential or Commercial Property in Scotland, If you are a property developer, landlord or investor and buying residential or commercial property in Scotland then having access to a fast bridging loan in Scotland is arguably the most important tool to have in your toolkit.
Knowing you can act quickly to secure the funding you need to complete your purchase can be imperative to securing your acquisition and puts you in a position that is similar to being a cash buyer due to the speed in which a bridging application can be completed.
One of the main advantages is that if you were to take a bridging loan over a 12 month term and found yourself in a position to repay the loan in 4 months then you would only pay the interest for 4 months plus you can settle it anytime with no Early Redemption Charges, this provides a level of comfort for any overruns you may encounter on your project.
As you compare bridging loan interest rates, it should be kept in mind that, unlike a traditional mortgage, bridging loans are priced on a monthly interest rate, as opposed to an annual interest rate. This is due to bridging loans being for the shorter term and having variable loan terms that are between 3 and 24 months in length.
Interest rates vary between lenders and can typically range from 0.65% per month to 2% per month dependent on a number of criteria factors that are considered.
The lender arrangement fee will be in the region of 2% of the agreed loan amount.
There are generally three ways a bridge loan can be repaid, from the outset it is imperative that a pre-defined exit strategy is established, it can be from the sale of the property being purchased, the sale of another property or if your intention is to retain the project and rent it to a third party the loan can be repaid by refinancing the project to a longer term commercial mortgage.
Alternatively, development exit finance can be utilised while you are waiting for the sale to complete to allow you to repay your loan and take your profit out of the project for re-investment in your next project.
Closed bridging loans are when you have an acceptable pre-defined exit route in place, this offers the lender a level of comfort and allows the lender to offer a better interest rate knowing that the loan will be repaid when it is due to be repaid. An acceptable pre-defined exit route could be the future sale of the property you are purchasing, the sale of another property or the refinance of the property you are purchasing to a longer-term mortgage.
Open bridging loans are when you don’t have a pre-defined exit route in place, this is not particularly attractive to bridging lenders as they don’t know when the loan will be repaid and because of this the interest rate charged will be higher due to the risk level being higher.
Loan to value (LTV): The LTV is calculated as percentage of the loan amount you require measured against the purchase price of the property you are buying, similar to a traditional mortgage, the lower the LTV is, the lower the bridging loan interest rate is.
The Property Type & Condition: Residential property purchase attracts the lowest interest rate as this carries the least risk, followed by Semi-Commercial and then Commercial.
Bridging Lenders break this down into the following categories with the interest rates and LTV’s being tiered for;
Residential Light Refurbishment.
Residential Heavy Refurbishment.
Semi-Commercial Light Refurbishment and
Semi-Commercial & Commercial Heavy Refurbishment.
Location, Location, Location: Bridging lenders will consider the location of the property being purchased. For example, if the property you are buying is in the highlands or islands of Scotland it may be deemed more difficult to sell and the interest rate may be a bit more expensive than the mainland to account for this.
There are 3 options as follows to choose from:
Monthly: Just like an interest only mortgage, the interest payment is paid monthly, however the downside to this option is that you have to prove affordability in the form of declared income and then like a traditional mortgage maintain the monthly interest payments.
Rolled up/deferred: Interest payments are added to the loan amount and rolls up, to be paid along with the capital loan amount when the loan comes to completion.
Retained: By far the most popular method of interest repayment for borrowers and lenders, this involves calculating the interest for the term of the loan and adding it to the loan amount, if you are in a position repay the loan early then any unused interest is rebated in your settlement figure.
We have over 30 years experience and can offer innovative financing methods for developers and investors.
We offer Bridging, Refurb & New Build Development Finance and Buy to Let Mortgages.
We'll keep you informed every step of the way and if required, continue to support even after completion.
We built the Property Profit Calculator App as an aid for Property Developers & Investors
We wanted to build an app that had a real convenience and benefit to others in our property and finance world.
The App is Forever Free to use with or without a funding requirement.
Easily assess the viability of your property project within 60 seconds, then if required, book a time slot to discuss your project with a funding expert.
Absolutely delighted with the service levels and attention to detail provided and was never left wondering what was happening with my residential development bridging application, I saved over £1000 in legal fees and it completed ahead of schedule. Happy Days.
Mr. C from Glasgow. Property Developer.