FAQ


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BRIDGING LOAN FAQS


WHAT IS A BRIDGING LOAN?

A bridging loan is a short-term interest-only bridging finance loan available to those that need immediate access to capital. It is a loan to ‘bridge’ the gap while other finance (such as a mortgage) is secured by the borrower or whilst a sale is being negotiated. Bridging finance is secured, meaning the borrower uses property (or land) as security to the lending institution.

WHERE DOES TEMPUS CAPITAL GET ITS FUNDING FOR BRIDGING LOANS FROM?

Tempus Capital receives funding through private investment. We use a variety of funding sources ranging from high net worth individuals through to traditional banks.

WHO CAN APPLY?

Any individual or limited company can apply for a bridging loan.

WHO MIGHT USE A BRIDGING LOAN?

Bridging loans are mainly used by clients that need quick, short-term capital to fund a property purchase. They include those who:

  • need to complete quickly. This might include property developers, who often have the opportunity to secure a great deal if they can complete quickly.
  • buy through a property auction. Bridging finance is popular with those buying property at an auction. Here, completion has to take place within 28 days which means traditional financing is not usually an option.
  • are in a broken property chain. A bridging loan enables a seller of one property to secure their new property before the sale of their existing property goes through.
  • want to buy an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). A bridging lender will base its lending on the property’s value in its current condition, however. This means the buyer can get access to the property and work on it to make it habitable.
  • are renovating or developing a current property. A property investor may want to renovate a property within a few months and either sell it on or refinance. A bridging loan can often be the perfect vehicle for this short-term capital requirement.
  • have to get planning permission. In order to obtain planning permission and secure development funding, the developer may need immediate access to capital.
  • need a lease extension. When a property has a short lease a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.

DO YOU ONLY LEND ON SPECIFIC TYPES OF PROPERTIES?

No. We lend on residential, semi-commercial and commercial properties including HMO's, permitted developments and land. The construction, type or use or the property doesn’t matter either.

IS THERE ANY EMPLOYMENT CRITERIA FOR THE BORROWER?

No.

HOW LONG CAN A BRIDGING LOAN BE TAKEN OUT FOR?

As a short-term loan, they are generally taken out for up to one year. However, it is not uncommon for some bridging loans to last for up to two years.

HOW MUCH CAN BE BORROWED?

Typically, the minimum amount that can be borrowed for a bridging loan is £35,000. The maximum amount of funding depends on both the value of the property used as security, and the loan to value. Tempus Capital has lots of experience in lending multi-million pound sums.

MAJOR BENEFITS

  • Funding to close on a new property
  • Funding to make a down payment on a new property
  • Funding for refurbishment or renovations
  • Flexible lending terms that can be tailored to your specific needs

Flexibility is key. When it comes to loan repayment – unlike a traditional mortgage – there are usually no penalties for early repayment. More importantly, a bridging loan allows you peace of mind to set your own schedule and avoid an overly rushed process. Imagine a new investment property becomes available and you know it’s right for you. A bridging loan will allow you to purchase the new property. Depending on the duration of the loan, the extra weeks or months can be vital.

COSTS?

Unlike a typical mortgage, bridging loans are more expensive. However, due to the short-term nature, the out-of-pocket costs are small relative to the plethora of benefits. Other fees such as an application fee, administration fee and property appraisal fee can also apply. Interest can be serviced if approved or rolled up if requested with some lenders.

WHAT IS THE DIFFERENCE BETWEEN A FIRST AND SECOND CHARGE LOAN?

A ‘first charge’ is the primary mortgage or loan secured against a property. This takes precedence over all other finance secured against it. If there is sufficient equity in the property, however, then a ‘second charge’ loan could be secured against it.

HOW LONG DOES IT TAKE FOR A CLIENT TO RECEIVE FUNDS?

Each case is reviewed individually. However, if all the paperwork is complete then a client could receive funds in as little as 12 hours.

WHEN WILL MY CLIENT FIND OUT IF THEIR APPLICATION HAS BEEN SUCCESSFUL?

Our experience means that in most cases we will be able to confirm almost straightaway whether your client’s application is likely to be successful.

HOW LONG WILL A BRIDGING LOAN APPLICATION TAKE TO COMPLETE?

From the initial enquiry through to completion, our average turnaround time is just two weeks. However we have done deals in 48 hours.

IS MY CLIENT SUBJECTED TO A CREDIT CHECK?

A credit check is not carried out by Tempus Capital unless we are given permission to do so by your client. We may ask for the borrower to provide one.

WHAT IS THE PROCESS ONCE THE APPLICATION HAS BEEN SENT?

Once we receive the bridging finance application form (and the certified identification documents) we will issue indicative terms. We will then book a valuation and legals at the same time if time is of essence. Once the valuation report is completed and legals satisfied funds will then be sent to the solicitor for completion.

ARE THERE ANY UPFRONT FEES?

No.

WHAT INTEREST RATE WILL THE CLIENT PAY?

This depends on the individual circumstances of the borrower. However, the interest rate ranges between 0.75% to 1.5% for each month of the loan, and the borrowing is done on an interest-only basis.

CAN THE LOAN BE REPAID EARLY?

Yes. Once the borrower secures longer term funding then the bridging loan can be paid early without penalty in most cases.

WHAT IS AN EXIT ROUTE?

As bridging loans are for the short-term, each client must have a plan in place to pay off the loan. This is known as an ‘exit route’. This can be a sale or a refinance for example. A viable exit route is a must on all bridging loan applications.


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TempCap is a trading name of Tempus Capital Partners Limited registred:  08969939


We do bridge loans, property finance, bridging loan, auction finance