Auction Finance

Bridging Finance can be for a term as short as a few weeks, right up to 2-3 years in some instances. Which may sound surprising as this period sounds like a really short mortgage term rather than Bridging, but perhaps over that term it is being used until a better long term mortgage is available, you may need time to get your financial affairs in order, or complete property refurbishment.

The finance can be from a wide array of lenders, these can be High Street Banks, Challenger Banks, Specialist Lenders, Peer to Peer Lenders, or just straight forward Bridging Lenders. The brokers have over 100 short term finance providers, that list is continually upgraded, amended, and added to as more lenders reach the market. These lenders all have something to bring to the market, but many of them are much the same.

When Bridging Finance is put in place it always ensures that the exit route is viable, it is advised you must not enter this finance type without a viable way out at the end of the term. At the end, the Lenders will often expect an immediate redemption, and many lenders have expensive default interest should you have to extend.

Not all lenders charge an administration fee, but most lenders will have it in one form or another. Usually a few hundred pounds, our brokers on a fee of £300 as average. Peer to Peer Bridging Lenders often call this a ‘lock in fee’.

All lenders will have an arrangement fee, this is usually 2% of the loan amount, some lenders are slightly less, and some Lenders charge up to 3%. The brokers work on an average fee on a £100,000 loan at £2,000.

As the borrower you are liable for both your own legal fees, and the Lenders. The Lender’s legal fees vary. Sometimes they offer dual representation which can serve to reduce the overall legal fees. The average Lender’s legal fees on a loan of £100,000 would be circa £1,000 plus VAT. Please also note that most Lenders will charge a legal undertaking to be paid after the loan is offered but before legal work is instructed. This is not a separate fee but an upfront part, or even the whole lender legal fees cost. It protects the lender from loss should you walk away without completing the loan.

The Lender will usually require security property to be valued, they will arrange the valuation although sometimes they allow our panel of brokers to instruct a Valuer. The cost on a £100,000 loan would be about £400 on a residential property, and about £750 on a commercial property. These are just estimates but, each valuation company sets their own fees. On valuations, Lenders also use one of a number of valuation figures, some will use OMV (open market value), some use the 180-day figure which is often a lower value outcome as the property would be judged as a ‘must sell’ in 180 days, and some use the 90-day value which is always the lowest valuation. Our brokers judge which valuation is best for your loan and choose a lender accordingly.

Many Lenders will have a pre-set redemption penalty should you redeem the loan early, and many also have a redemption fee that they charge when the loan is redeemed anytime. Our brokers assess that for you when making a recommendation.

This is usually the most important to a client, often before assessing all the fees. Having the cheapest rate is not the most cost effective if all the lenders other fees are extortionate. Interest rates today can be researched, and you will find a plethora of figures and rates ranging from 0.25% per month to about 3% per month. Why not let our panel of brokers weigh up all the rates whilst also considering all the other fees? The average rate will be about 0.75%, on a £100,000 loan that will be £750 per month. All Bridging loans are interest only.

As the loan progresses through the term, this means that you pay the interest each month.

This means that a gross loan is set up that also includes the interest. So for example if you have a 9-month term on a loan at £100,000 gross and the interest was charged at 0.75% then that will be £750×9=£6,750 deducted so the net loan would be £100,000-£6,750=£93,250. Of course, this does not take account of other Lender Fees that are deducted like Legal Fees and Arrangement Fees.

Like the serviced option, there is no deduction for retained interest, however rather than servicing it adds monthly to the loan.

Our market brokers have no limits to which Lenders they use, from our research they will recommend the lender that best suits your circumstances, taking the following into account:

• - Your credit files
• - The value of the asset/property
• - The LTV (loan to value)
• - Whether a loan is 1st charge, 2nd charge, or even 3rd charge.
• - Your experience if the loan is for a refurbishment or development type of finance.
• - The amount of cash or security that you can offer.
• - The term of finance.
• - The exit routes
• - How you set up the interest repayments