Wednesday, 1 February 2017
Bridging finance is short term finance, usually secured against a property, and is designed to “bridge” a gap. Essentially, bridging finance can be used in both commercial and residential property transactions and is an ideal solution for borrowers who simply need fast access to funds.
At MTF, we believe a bridging loan is about creating the opportunity to either make or save borrowers money.
2. Bridging finance uses
Bridging finance is versatile and can help provide a solution in many circumstances, including buying a property at auction, chain-breaks, and funding an investment property purchase and necessary refurbishments. Bridging finance can also be used by businesses to raise capital or secure a business deal.
3. Know your exit
Since a bridging loan is not intended to be used as a long term method of finance, it is important to ensure you have an exit route. This might involve getting a mainstream mortgage, a buy-to-let mortgage, or selling the property.
4. The process
Depending on the regulatory status of the lender and each lender’s own processes, the steps to obtaining a bridging loan may vary. Generally, once an initial application has been submitted, indicative terms will be issued for the borrower to agree with. Lenders who specialise in quick bridging, like MTF, will aim to do this within a matter of hours.
Valuation and Legalities: A lender will then instruct a valuation for the security of the loan and instruct lawyers to handle the legal process. Some lenders may instruct solicitors earlier, depending on the time constraints of the case. To speed up the process, it is important a borrower uses a lawyer specialised in bridging finance, so that a request can be completed as quickly and accurately as possible. Many lenders use a panel of pre-approved solicitor firms to help speed up a transaction.
Getting Funds: Once the lender has received a satisfactory valuation report and all the legal due diligence has been confirmed by solicitors, funds will be released. Typically, funds can be released between 5 to 14 days. On some occasions funds can be released a lot quicker, depending on the borrower’s deadline.
5. The costs
The costs will depend on a borrower’s circumstances and the terms of the bridging finance loan. Borrowers should also factor in other costs such as arrangement fees, legal fees, surveys and valuations.
Tomer Aboody is a founding directore of MTF. With over 20 years' experience in the property market, both in the UK and abroad, he brings first-hand understanding to the property finance sector. Tomer is the driving force behind MTF's asset-based lending approach and commonsense attitude to underwrting a bridging loan.
MTF is a leading bridging finance lender specialising in short term loans including auction finance, bridging loans, on both a first and second charge basis and is recognised throughout the industry for its speed and service.
Established in 2008, the company has won multiple awards including Best Bridging Finance Provider at the Business Moneyfacts Awards 2016, Service Excellence Award at the Bridging & Commercial Awards 2015 and Best Service from a Bridging Finance Provider at the Business Moneyfacts Awards 2014. It was named ‘Short-term Lender of the Year by the NACFB in 2014.