Do I Need a Bridging to Buy & Do Up a House?

Certainly! A bridging loan is a short-term loan that is typically used to bridge the gap between the purchase of a new property and the sale of an existing property. However, they can also be used for other purposes, such as financing property renovations or refurbishments, as in your case. 

A bridging loan / development finance, is too short term for mainstream lenders. The rates for bridging are higher but they reflect the type of lending being carried out, which is short term finance where the exit strategy is the sale of the property. 

In most cases the loan interest will be 'rolled up' and added to the overall borrowing, along with the arrangement fee. There is a lot of competition in the bridging loan market these days and so while the rates are higher than standard residential and buy-to-let rates, we can still make sure that you get the best deal available. 

Here's how bridging loans work and some key considerations: 

1. Short-term financing - bridging loans are designed to provide short-term financing, usually for periods ranging from a few weeks to a few months. They are intended to be repaid quickly, often once the property is sold or refinanced  
2. Quick access to funds - bridging loans can be arranged relatively quickly, making them suitable for time-sensitive transactions such as property purchases or renovations. This quick access to funds can be advantageous if you need to move quickly on a property deal  
3. Secured loan - bridging loans are typically secured against a property or other assets, such as the property you're purchasing or renovating. This means that if you fail to repay the loan, the lender has the right to take possession of the property to recover their funds  
4. Higher interest rates - one of the main drawbacks of bridging loans is that they often come with higher interest rates compared to traditional mortgages or loans. This is because they are considered higher risk due to their short-term nature and the fact that they are usually secured against property  
5. Fees and charges - in addition to higher interest rates, bridging loans may also come with additional fees and charges, such as arrangement fees, valuation fees, and exit fees. It's essential to factor these costs into your calculations when considering a bridging loan  
6. Exit strategy - lenders will want to see a clear exit strategy for repaying the bridging loan. This could involve selling the property, refinancing, or using other funds to repay the loan  
7. Loan-to-Value Ratio - bridging lenders will typically lend up to a certain percentage of the property's value, known as the loan-to-value (LTV) ratio. The LTV ratio will depend on factors such as the property's condition or location  
8. Professional advice - given the complexity and potential risks associated with bridging loans, it's advisable to seek advice from a mortgage broker like John Charcol. We can help you understand the pros and cons of bridging finance and find a suitable loan product for your needs  

Overall, bridging loans can be a useful financing option for property renovations or refurbishments, especially if you need quick access to funds and have a clear exit strategy in place. However, it's essential to carefully consider the costs and risks involved before proceeding with a bridging loan. 

If you'd like to discuss the options open to you in more detail, then please contact one of our consultants on 0330 433 2927 and they'll be able to give you a more detailed idea of the bridging / development deals that may be available to you.