Bridging enquiries

We use bridging quite regularly for our developments and for short term projects before moving to a term product. Bridging in its true avatar only makes sense when the exit is thoroughly defined. For those that are using bridging for things like a chain-break (without securing an onwards buyer), or to borrow more because their term lender won’t lend them enough, this method is fraught with danger. We would only ever use bridging when we have an assurance that the expected outcome at the end is confirmed. Being an unregulated product, bridging loans come in all shapes and sizes. Amongst the brokers, it is sometimes a case of the wild wild West when it comes to recommending a bridging product as they don’t necessarily need to recommend the product with the lowest cost. Often times unscrupulous brokers would refer clients to a handful of bridgers who might not be the best fit for the client but would be great for the proc fees in the broker’s pocket.

Bridging plays a pivotal role in our business operations. We frequently employ bridging solutions when clients express their intent to acquire a property, conduct minor renovations, and subsequently sell it for a profit – a scenario that occurs most frequently. Additionally, we've observed clients leveraging bridging options for the acquisition of Buy-to-Let (BTL) properties, either intending to refinance when interest rates become more favorable or to flip the property if rates do not align with their objectives. Notably, we recently facilitated a regulated bridge loan for a client who was constructing a new home and required £200,000 to cover second fix builder expenses. The bridge loan was successfully settled upon the sale of her property. We recommend bridging as an ideal financial tool when it aligns with the unique circumstances of our clients.

The combination of how Buy-To-Lets are taxed and the rising mortgage rates has resulted in extremely narrow profit margins for Buy-To-Let owners, often causing them to incur losses.

Consequently, these owners are compelled to make a tough choice; either sell their properties in a buyer's market or revamp and enhance their properties to boost returns. This dilemma raises the issue of how to proceed when their Buy-To-Let mortgages are held by lenders that do not permit funds for structural changes, rendering the property unsuitable for renting, or when the stress test calculations do not align with the criteria of a Buy-To-Let lender.

As a result, many of our clients find themselves in need of both bridging and development finance. In most cases, this leads to substantial capital appreciation and a property that generates consistent profits, far outweighing the costs associated with the financing.