Bridging Finance Legal Experts

Bridging finance is a short term (typically around 12 months) secured loan, which is intended to provide capital to purchase a property for a period of time until the purchaser can either secure a longer-term refinance (mortgage) or sell the property.

Our solicitors can guide you through the legalities of bridging loans, ensuring your agreements are sound and your transactions proceed without a hitch.

Bridging finance is typically used by investors to purchase a property that requires refurbishment and would be considered uninhabitable by a normal lender. The short-term finance would allow the investor to purchase the property and carry out the renovations. The investor would then refinance the property (to pay off the bridge) towards the end of the loan term and will usually refinance at the increased property value.

Bridging loans can also be used when purchasing a property at auction, or to assist a purchaser in buying a new home if they have not yet sold their current home.

Security
Bridging lenders will request a first legal charge over the property. If the purchaser is a limited company, then it is also likely that the lender will want a debenture (floating charge) over the company assets, and will also request that all directors of the company provide personal guarantees for the amount borrowed.

Exit Strategy
With all bridging loans, the lender will need to be satisfied that you have a planned exit strategy, i.e. a plan on how you intend to repay the loan in full at the end of the short term. Using the examples above, this could either be a refinance to a regular mortgage after development / renovation, the sale of the property if the intention was to ‘flip’, or the sale of your current home if you have bought a new home.

Bridging loans can offer quick and flexible finance options, but interest rates are high and there can be other associated fees. It is therefore vital to ensure you have a plan in place to pay off the loan prior to the end of the term.