What is a Bridging Loan?
Traditionally bridging loans were provided to borrowers that needed to buy a property quickly but did not have enough time to arrange their financing. Bridging loans were typically, inflexible, expensive and the penalties for late payment were severe.
For example, you might use a bridging loan to buy a new home but find that under the terms of the loan you couldn’t occupy the house!
Terms were for up to 12 months but the costs meant that borrowers would not typically want to borrow for much longer than 3-4 months, which was typically the time it might take for a complex or tricky financing to occur.
When to use Bridging Loan?
Today Bridging Loans offer a much broader and more flexible range of options for customers. Bridging loans can be used for the following purposes:
- buying a home and refinancing to a long term mortgage
- buying a buy-to-let property and refinancing to a buy-to-let mortgage
- buying a plot of development land without planning and using the bridging loan to get planning for the property
- Buying a development site with planning consent quickly
- Refurbishing a property and then selling once refurbished/refinancing to a BTL mortgage or commercial mortgage
- Carrying out a wholesale development of a property (and then selling the property)
- Refinancing a completed development facility and releasing equity for the developer so they can buy a new development site
- Releasing value from cars, fine art and jewellery
What do you need to know about Bridging Loan?
Loan terms can range from just a few months to 18 months, although 6-12 months is most common.
The costs for bridging loans varies from 4% for low LTV first charge bridging loans on your home to 18%+ for esoteric property developments or sites without planning or second charge development loans. For non-property bridging loans you may have to pay over 30% pa.
You will also pay an arrangement fee of 1-2% of the loan amount based on the circumstances, some of this will be paid to a broker if you have one acting for you. Our pricing starts around 0.75% pcm and adjusts based on the risk.
Interest will be rolled-up or serviced. If the interest is rolled-up this may reduce the net amount you borrow depending on the term of the loan and how long the interest is rolled-up for. If interest is serviced, you will pay interest monthly, although it is unusual for capital repayments to be obligatory on bridging loans.
Loan to Value ratios vary, but for regulated loans (i.e. loans against your home) these can be as high as 90% or more. For unregulated loans, you can expect to borrow up to 70%-75% of the property value. Avamore Capital is an unregulated lender so we do not lend against people’s homes. Our LTVs can go as high as 79% LTV for the right deal.
Non-residential LTVs are lower, typically around 60% although this can be higher for “prime” assets, particularly if the loan can be refinanced by another lender on a long term basis. Avamore Capital will lend up to 70% of the value of a property.
What does Avamore Capital offer?
We provide tailor made short term property loans for property developers, investors and entrepreneurs.
Our short term property loans are secured against residential and/or commercial property in:
- Home Counties
- Bristol & Bath
- Oxford & Cambridge
Loan amounts range between £500,000 to £7m funded on our Principals’ families’ balance sheets. Monies can be drawn down in as little as 5 working days. Larger loans can be written with our external investment partners.
Rates start at 0.75% per month and bridging short term property loans are subject to a maximum term of 364 days and 70% loan to value (LTV) ratio.
If you have any further enquiries regarding bridging loans or how we, please do not hesitate to get in touch via firstname.lastname@example.org