Fast bridging loans can provide funding when you’re faced with time-critical financial opportunities.
As Stephen Clark, from Finbri bridging loans, explains “When developers and investors spot a property investment opportunity, they must act fast. Using a fast bridging loan can often provide the funding in as little as three days, ensuring that an investor doesn’t miss out on their next profit-making opportunity.”
What are bridging loans?
Bridging loans are a short-term finance solution used to ‘bridge’ the gap between buying a property and selling an existing property. This type of finance is typically used when buyers need to complete a purchase quickly, but their sale has not yet completed.
What is the speed difference between a standard bridge and a fast bridging loan?
The speed difference between a standard bridge and a fast bridging loan can be significant. With a standard bridging loan, the process can take several weeks from start to finish. However, the process can take as little as three days with a fast bridging loan.
Fast bridging loans, also known as mini-bridges, are typically available on lower levels of borrowing, for example up to £200,000 secured on traditional residential properties. The speed of the loan is increased by several factors. Firstly the lender may offer the use of dual representation for the legal work, this in itself cuts out a lot of communication delays and significantly speeds up the transaction. Additionally, when the property is a typical ‘vanilla’ profile, that is to say its of traditional construction, in a good location and in good condition, the valuation can be completed remotely. This is known in the industry as a desktop valuation. As a lot of housing stock in the UK typically fits this profile its very easy for lenders to assess the value of this type of property and subsequently it can be assessed faster than an in person visit.
What can fast bridging loans be used for?
A fast bridging loan can be used for a variety of purposes, including:
- buying a property at auction
- funding a land or development opportunity
- purchasing an investment property at auction
- stopping repossession
- raising immediate cash to deal with an emergency
What are examples of fast bridging loans?
The following would be examples of bridging loans that can be completed in days – not weeks:
Example 1: The borrower requires a gross loan of £200,000 for any purpose. They own an unencumbered residential property that has a market value of £275,000 or more, and are willing to use that property for security against a loan. Providing the property is of traditional construction, is in good condition and in a good location then it may be possible to complete the bridging loan in three working days.
Example 2: A developer has spotted an investment opportunity at auction that needs refurbishment and will cost £400,000. They will need £200,000 to complete the purchase. The developer intends to refurbish and refinance to a buy-to-let mortgage and rent the property. As auctions usually process property sales a lot quicker than typical purchases, a fast bridging loan in this scenario can provide the funding needed to complete the auction purchase.
How can I speed up the bridging finance process?
Following these four simple steps will put you on the right track to obtaining bridging finance in the quickest time-frame possible.
- Speak with an experienced broker – Always look for a professional broker for a fast bridging loan, as their knowledge and experience of the current lending market can provide a quicker turnaround as they should be able to source the right lender for your deal.
- Ensure your exit strategy is robust – As your exit strategy is a crucial component of the lending decision, a strong, low-risk plan to repay the loan will assist the lender in making their decision swiftly. An expert broker can analyse this and, if necessary, provide advice. Typical exit strategies are either the sale of the property or the refinancing of the property onto a more longer term finance such as a traditional residential mortgage.
- Provide everything the lender requires – The quickest applications have all the required information present and correct. This should include details of the property being purchased or used as security and if it’s a refurbishment or development project, then a schedule of works will be required, as will the plans, appointed contractor’s details, evidence of previous experience, and cost estimates for the work. You should also be prepared to share your ID, proof of address and a recent credit history report, such as one from Experian, or a similar credit scoring platform.
- Be truthful – Always be truthful in what you are trying to achieve and be open about any possible issues you’re aware of that may hinder your eligibility to obtain a loan. Lenders will eventually uncover any issues through their due diligence process and whilst problems with a poor credit history aren’t necessarily equate to a definitive ‘no’, being found to be dishonest will certainly cause an application to be rejected.
Factors that influence approval speed
Various factors influence how long it takes to process your application and are not always within your control. These are some examples:
The lender
Bridging lenders’ practices and criteria can differ significantly from one another. Even if you produce all papers ahead of time and have the simplest of conditions, some lenders conduct more extensive credential checks than others, which might delay the procedure.
How much money do you need to borrow
Some lenders base their bridging loan turnaround time on borrowing thresholds, meaning that while relatively small amounts can be arranged in a matter of days, borrowing in the millions is more likely to take weeks with most lenders.
The type of bridge loan
Bridging loans can be regulated or unregulated; the type you require will depend on the loan’s purpose. If it’s for a residential property purchase that will be your main residence, the loan will be regulated by the FCA (Financial Conduct Authority). If the purpose of the borrowing is for an investment property then this isn’t currently a regulated market and so doesn’t take as long to complete as the checks required are fewer.
Purchase property type
Aside from its residential or commercial status, each unique property and its specific usage will be evaluated on a case-by-case basis. As a result, particular properties may be accepted faster than others, such as a loan for a residential property in saleable condition in a high-demand location when compared to a grade two listed hotel that is to be converted into multiple dwellings
Survey results and valuation
Many lenders would want to arrange valuations and legal searches on the property, which can take a long time if any concerns are discovered.
However, some lenders may contemplate accepting a recently completed RICS assessed valuation or by using a desktop valuation. If speed is essential to you, your broker should be able to identify lenders willing to expedite the application.
The strength of your exit strategy
If your exit strategy is strong, this will give the lender confidence that they will be repaid, which can lead to a quicker decision.
Whether you have previous property development or portfolio ownership experience
Although not required, many lenders will be more comfortable with borrowers who can have previous development or portfolio ownership expertise.
Your credit history
Bridging lenders are usually accommodating with adverse credit, but it can sometimes delay the procedure depending on how comfortable the lender is with your exit strategy. Even if you have poor credit, you may be able to obtain a non-status bridging loan.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence
