Bridging finance is a short-term loan typically secured against a property. It is normally used when a traditional finance agreement such as a mortgage is unsuitable whether this is because the property does not meet the traditional requirements of mortgage lenders, the borrower does not meet normal mortgage criteria or because the finance is only required for a short term – between 1 month and 3 years.
With retained interest calculations, a lender will calculate the estimated interest charges for the term of the loan, add this to the loan advance and then retain the funds to service the interest payments every month until the loan is repaid or the term comes to an end.
Interest roll-up is when a lender agrees that the repayment of capital and interest can be deferred for a period, usually until the end of the loan term. In this period, you won't make any repayments at all. Interest will continue to be added to the loan monthly, weekly or possibly daily.
In this situation you should make sure you understand the impact of compound interest, namely you will be paying interest on the interest each time a new interest amount is added.
Put simply, Compound interest is interest charged on interest. As interest is added to the principle loan amount, the following month, interest is calculated on the new loan amount which includes the original principle loan amount plus the rolled-up interest from the previous month.
This means that the interest charged on a loan is being repaid monthly rather than being added to the loan. Given the nature of this type of arrangement, lenders will normally want to see evidence that the borrow can afford to make the repayments every month in much the same way as a traditional mortgage.
This refers to a borrower’s plan to repay their loan. Typically, this will be by refinancing on to a longer-term loan agreement, selling the security property (ies) or using other personal funds when they become available such as inheritance. In most cases a lender will want evidence of a borrower’s proposed exit strategy prior to release of funds.
Yes, there are lenders that provide bridging finance for clients who have County Court Judgements, defaults, arrears and also discharged bankruptcies.
The bridging loan facilities can be secured as first or second charges, and in some circumstances even third charges, if there is still sufficient equity in the property.
Different lenders have different definitions of what constitutes a light refurbishment but broadly speaking, this applies to a project that does not require any structural change to the property or the requirement for planning permission
Unlike light refurbishment, a heavy refurbishment will normally involve structural changes to a property and in most cases, planning permission (unless covered under PDRs) will be required.
PDRs allow changes to a building without the need to apply for planning permission. They derive from a general planning permission granted by Parliament, rather than from permission granted by the local planning authority (LPA). An example of PDRs is the conversion of a commercial property into a residential property.
It is a statement made under the Town and Country Planning Acts, specifically the Town and Country Planning (General Permitted Development) Order 1995. The direction removes all or some of the permitted development rights on a site. Typically, it removes the PDR to convert a property from Class C3 commercial property to a Class C4 residential property. Some local authorities have designated entire areas within their control as Article 4 areas
Typically, this is applies to an investment property which you have never live in and have no intention of doing so. This can be a residential property or commercial at in some cases land. This type of loan can be arranged will normally have a maximum term of 24 months but in some cases, up to 36 months.
Security is the term used for whatever land or property the lender secures the Bridging Loan charge against.
This refers to additional property that is offered to a lender to increase the security and lower the total loan to value (LTV) of a loan which will generally lead to better lending terms being offered to the borrower.
A commercial mortgage is a mortgage loan secured by commercial property, such as an office building, shopping centre, industrial warehouse, or apartment complex. The proceeds from a commercial mortgage are typically used to acquire, refinance, or redevelop commercial property.
Owner-occupier mortgages: This is used to buy property that will be used as trading premises for your business. Commercial investment mortgages: This is used for property you're planning to let out.
You will typical require a 25% to 40% deposit, which varies based on the lenders calculation of the risks involved. Commercial investments are usually on the higher end of this scale.
Owner-occupied commercial mortgages are seen as less risky for the lender and can be done with a 20%-25% deposit.
Once you have submitted your enquiry and any required documents, indicative terms are normally issued within 24 hours. The loan will normally complete within 6 to 8 weeks of submission of the full application but can take longer depending on the complexity of the case.
Commercial mortgages can be arranged over a term of up to 25 years but typically, most lenders prefer to set a shorter term of 10 – 15 years.
Is another way of referring to a capital repayment mortgage. It refers to the process of paying off a mortgage through regular payments. A portion of each payment is for interest while the remaining amount is applied towards the principal balance.
Most lenders will want investment borrowers to have experience in letting commercial property but there are some that will take a view on first time commercial landlords if they have other letting experience. In some cases – such as purchasing a Care Home. The lender will want to under what specific care home experience the borrow has.
Owner occupiers will normally need to provide evidence that they have been trading for a minimum period along with accounts that demonstrate their ability to service the proposed mortgage.
All products are for unregulated bridging only. Should you require a regulated bridge, please contact us. As a mortgage is secured against your property, it could be repossessed if you do not keep up the mortgage repayments.
Commercial Mortgages and some forms of bridging and buy to let finance are not regulated by the Financial conduct Authority.