A bridging loan (also called bridge finance or a bridge loan) is a short-term funding option tailored for property developers and investors. It helps finance the purchase or refinancing of property when traditional mortgages are not suitable. Typical scenarios include:

• Properties in need of renovation or refurbishment.

• Converting properties from commercial to residential use.

• Making title or classification changes.

• Purchasing property at auction, where funds are needed quickly.

Bridging loans differ from traditional mortgages in their purpose, flexibility, and speed. They are ideal for properties that may not meet the criteria for standard mortgage approval, such as:

• Uninhabitable properties requiring repairs.

• Properties undergoing title changes or use-class conversions.

Key Features of Bridging Loans:

• Faster Processing: Funds are typically available within 3–4 weeks, much quicker than a traditional mortgage.

• Valuation: Loans are often based on the property’s Open Market Value (OMV) rather than the purchase price, making them suitable for Below Market Value (BMV) purchases or auction acquisitions.

• Interest Flexibility: Interest payments can be rolled up for the loan term, eliminating the need for monthly payments until the loan matures.

Bridging loans are an effective solution for quick, flexible financing, especially for non-standard property transactions.

The amount you can borrow and the interest rate offered depend on several factors. Here are the key considerations that influence your loan eligibility:

• Borrower’s Experience: Previous development or investment projects.

• Credit History: The borrower’s creditworthiness and repayment track record.

• Financial Standing: Background and net worth of the borrower.

• Land Cost or Purchase Price: The cost of acquiring the land.

• Build or Refurbishment Costs: The projected expenses for development or renovation.

• Gross Development Value (GDV): The estimated market value of the completed project.

• Project Type: Whether it’s a new build, mixed-use development, or multi-unit property.

• Feasibility: The viability and overall potential of the project.

By considering these factors, we work to tailor a financing solution that aligns with your development goals and maximizes your borrowing potential.

Traditional mortgages are typically based on the current value of a property, with lenders assessing this alongside the borrower’s financial eligibility to determine the loan amount.

In contrast, development finance focuses on the future value of the property, specifically its projected worth once the development or renovation is complete. This forward-looking approach allows developers to secure funding based on the potential of their project rather than its existing state.

The amount you can borrow depends on several factors, including:

• Your Deposit: The size of the deposit you can provide.

• Your Personal Financial Situation: Your income, credit history, and financial stability.

• Rental Income: Lenders place significant emphasis on the expected rental income, which usually needs to exceed the monthly mortgage payments by a set percentage.

Lenders assess these factors to ensure the property generates enough income to cover the mortgage and provide a safety margin.