Bridging Loan Llandudno

Bridging Loans Llandudno
Bridging Loan Llandudno

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We can help you secure a bridging loan in Llandudno

The North Wales town of Llandudno is home to many businesses, not just tourism.

For property developers looking to property in Llandudno, a bridging loan may be the perfect option.

At Build Capital we have a large panel of bridging loan lenders who are able to provide short term finance for whatever you need.

What is a Bridging Loan?

A bridging loan is a short term finance option which is secured on property.

Bridging is designed to be faster and more straightforward than a traditional mortgage. 

They’ve often been used to help buy a new property before an existing one sells but bridging is used for much more.

Clients use bridging loans to buy property at auction, to refurbish or convert it. It is also used to clear bills or raise capital for any legal use.

Bridging has become a very popular way of raising finance in the last 15 years, being used extensively by developers and those looking to buy quickly. 

Types of bridging loan available in Llandudno

There are several types of bridging loan, available depending on your needs and circumstances.

Open bridging loan

Open bridging is short term finance that has no particular end date and no defined repayment method.

This means there is no deadline for you to repay the bridging and can do so when convenient for you, though there is normally an upper limit of time. 

Closed bridging loan

Closed bridging is more common with these sorts of loans having a firm end date and an agreed repayment method. 

The repayment can be from sale of the asset or refinance.

These loans are less risky for the bridging lender as they know the borrower has a firm plan to repay.

First charge bridging finance

A first charge bridging loan is secured against a property as the primary or sole legal charge. This means the property has no other outstanding secured debts, such as a mortgage. When you obtain a first charge bridging loan on your primary residence, the loan falls under Financial Conduct Authority (FCA) regulation.

 

Second Charge bridge loan

Second charge bridging loans are secured against properties that already have an existing mortgage or legal charge. While these loans typically require approval from the primary lender, this requirement can be circumvented by using an equitable charge. Interest rates and fees for second charge bridging loans are generally higher than those for first charge loans. However, opting for a second charge loan may still be more cost-effective if it allows you to maintain a first charge loan with a very low interest rate.

 

Commercial bridging

Commercial bridging is a specialized form of bridge finance secured against commercial property.

 

Comparing bridging loans, how do I do it?

To compare bridging loans effectively, consider the total cost of each product rather than just the interest rate. This approach ensures you get the best deal, avoiding the lure of low headline fixed interest rates.

Key factors to compare include:

* The reputation of the lender
* How quickly the lender can complete your application
* Whether the product has a fixed or variable monthly interest rate
* The type of security that the lender requires
* Maximum LTV
* The lender’s application process
* Set-up costs and exit fees
* Late payment fees, default interest charges and extension fees

How do you get a bridging loan in Llandudno

The first step is to talk to us about what you want a bridging loan for and how much you want to borrow. 

We can then guide you to the best bridging lender and help you get the finance arranged as quickly, cheaply and easily as possible

How do bridging loans work?

Bridging loans offer quick access to lump-sum financing for property purchases or refinancing. Typically, interest charges are added to the loan balance, eliminating monthly payments. This is known as retained interest.

At the loan’s end, you repay the full amount, including interest and fees. The lender then removes their legal claim on your property.

Bridging loans are usually repaid through property sale or remortgaging, known as your exit strategy.

Lenders primarily consider loan-to-value (LTV) ratio and equity when assessing applications. Most offer up to 75% LTV for regulated bridges, while some extend to 80% for unregulated loans (not overseen by the Financial Conduct Authority). Second charge loans may have lower LTV limits.

Is bridging an alternative to a mortgage?

A bridging loan is not a replacement for a mortgage, but rather a short-term alternative when a mortgage is unavailable or unsuitable.

This form of financing allows you to borrow against a property when:

  1. The property doesn’t meet mortgage criteria
  2. You need funds quickly for a property purchase
  3. You face a temporary financial gap

For example, you might use a bridging loan to buy a new house before selling your current one.

Bridging loans are designed to ‘bridge’ financial gaps, offering more flexibility and speed than traditional mortgages, but usually at higher interest rates.

Is Property Investment the main reason for bridge loans?

Property investment is indeed the primary motivation for most bridging loans. This applies across various property types, including:

  1. Investment properties
  2. Buy-to-let properties
  3. Personal residences

The popularity of bridging loans in property investment stems from two key advantages:

  1. Speed: They allow quick property acquisition, often crucial in competitive markets or auctions.
  2. Flexibility: They provide funds for property refurbishment, enabling investors to increase the property’s value before long-term financing or sale.

What are some bridging loan advantages?

Fast Money Bridging loans are super quick. You can get one in about 5 days to 2 weeks. Sometimes, you can even get the money on the same day you ask for it! This is much faster than other types of loans.

Getting Cheaper Right now, companies that give bridging loans are competing to offer better deals. This means the cost of these loans is going down. You might pay as little as 0.47% interest, which is pretty good for this type of loan.

Works Around Your Needs Bridging loans are much easier to adjust to what you need compared to regular mortgages or other house loans.

No Monthly Payments (Usually) Often, you don’t have to make monthly payments on a bridging loan. Instead, all the costs get added to what you owe at the end. This can really help if you need to save money while fixing up a house or trying to sell it.

Can Buy ‘Difficult’ Houses Sometimes, banks won’t give you a regular mortgage for certain houses (like ones that need a lot of work). But with a bridging loan, you can still buy these houses.

Who can get a bridging loan in Llandudno?

Anyone can borrow  using these loans assuming the property has enough equity in it.

We can offer loans to individuals, partnerships, LLPs, Limited Companies, SPVs, Trusts and overseas borrowers.

Can I get a bridging loan with bad credit?

Yes, bridging loans are often available to borrowers with poor credit history, including those with defaults, CCJs, mortgage arrears, IVAs, debt management plans, and even past bankruptcies.

Are my consumer rights protected with bridging loans?

Regulated bridging loans are overseen by the Financial Conduct Authority (FCA), safeguarding consumer rights. This includes access to the Financial Ombudsman Service (FOS) for mediation if needed. Regulated bridging finance typically requires a robust exit strategy and is offered only as closed loans. For closed bridging loans, the exit strategy must be detailed during the application process.

Which property types are eligible for bridging loan security?

Bridging loans can be secured against various property types, including:

  • Land
  • Self-builds
  • Commercial and mixed-use
  • Uninhabitable property
  • Apartments
  • Bungalows
  • Houses
  • Maisonettes
  • Flats

How fast can bridging loans be arranged?

Bridging loans can typically be arranged in 5-21 days, with faster turnaround possible for urgent cases. The speed depends on the chosen lender, the complexity of your situation, and how quickly you respond to queries and submit required documents.

What are the borrowing limits for bridging finance?

Bridging loans are available from £10,000 with no upper limit. Very large loans are possible, potentially reaching £8m, £50m, or even £250m in theory. Your maximum borrowing capacity depends on factors such as property value, available equity, chosen lender, and property type (residential, semi-commercial, commercial, or land).

 

Are bridging loans risky?

While some bridging loans can be risky, most are not. The key to minimizing risk is having a clear repayment plan, allowing sufficient time for repayment, and maintaining a backup plan. This repayment strategy, known as your exit strategy, should be carefully considered before applying for the loan.

How do bridging lenders expect me to pay back a loan?

When seeking funding for residential property, commercial property, or land, most lenders consider various exit strategies. Common exit strategies include:

  • Refinancing the bridging loan to a longer-term mortgage
  • Sale of the primary property
  • Sale of other investments
  • Sale of a secondary property
  • Inheritance
  • Sale of shares

Property Bridging Loan Interest Rates

Current bridging loan interest rates range from 0.47% to 1.25% monthly. Rate variations depend on property equity, required loan to value (LTV), fixed or variable rate selection, and credit history. Loans over £1,000,000 may attract more favorable rates.

Fixed or variable rate status is often undisclosed; consult your lender or broker if this is important. Variable rates adjust with Bank of England Base Rate changes.

Key costs include:

  • Monthly interest rates
  • Valuation fees
  • Lender arrangement fees
  • Broker set-up fees
  • Legal fees
  • Exit fees

Exit and broker fees are often avoidable.

What additional fees are associated with bridging loans?

When setting up a new bridging loan, several fees may apply beyond interest charges:

  • Lender arrangement fee: Typically 1-3% of the loan amount, most often 2%. Usually can be added to the loan. May be reduced for larger loans.
  • Valuation fee: Required for property assessment. Covers basic survey, with more detailed reports needed for heavy refurbishment. Some lenders offer free desktop or automated valuations (AVM).
  • Legal fees: Cover both lender’s and borrower’s legal costs. Vary based on loan size, number of secured properties, and property type.
  • Broker fees: Some brokers charge fixed or percentage-based fees, occasionally upfront. Many don’t charge, but always disclose if they do.
  • Exit fees: Some lenders charge 1-2% of the loan amount upon repayment. Many brokers try to avoid lenders with exit fees.

These fees can significantly impact the total cost of the loan, so it’s important to consider them when comparing options.

Bridging Loan Costs - Total, including fees

Bridging Loan Costs and Functionality

Bridging loan costs average 5.64-12.2% annually, determined by loan-to-value ratio, credit history, property type, and intended use. Strongest applications (below 50% LTV, clean credit, residential property) secure lowest rates.

While pricier than traditional mortgages (3-5% annually), bridging loans offer unique profit opportunities through quick purchases or property development.

Bridging loans typically span 1-18 months, repayable in full at term’s end. Interest is often deducted upfront, eliminating monthly payments.

Two main types exist:

  1. Open loans: No fixed term, interest can’t be pre-calculated.
  2. Closed loans: Set term allows upfront interest calculation and deduction.

Open loans are costlier and require proof of monthly interest payment ability, leading to more complex underwriting. Closed loans, presenting lower risk, are generally preferred.

Regardless of type, a solid repayment strategy is crucial to mitigate risks.

 

Uses for bridging loans

Bridging finance can be utilized for various purposes, including:

  • To buy a property or land while pursuing planning permission.
  • Funding a property refurbishment.
  • Purchasing an unmortgageable property.
  • Buying property at auction.
  • To finance an uninhabitable property.
  • Acquiring a below market value property without a deposit.
  • Funding a business venture or tax bill.
  • To repay an existing mortgage during property sale.
  • Buying a property before selling your current one.
  • Quick property purchase or refinance.

This diverse range of applications demonstrates the flexibility of bridging loans in addressing various financial needs, particularly in real estate and business scenarios.

The Benefits of Using a Broker for Bridging Loans

Engaging a proficient broker when seeking a bridging loan can provide significant advantages:

  1. Market expertise: Brokers possess comprehensive knowledge of the bridging loan market, allowing them to identify the most suitable options for your specific circumstances.
  2. Cost savings: A skilled broker can often secure better rates and terms than you might find independently, potentially saving you substantial amounts over the loan period.
  3. Time efficiency: Brokers streamline the application process, handling paperwork and communications with lenders, thus saving you valuable time and effort.
  4. Access to exclusive deals: Many brokers have relationships with lenders that offer products not directly available to the public.
  5. Tailored advice: Brokers can provide personalized guidance based on your financial situation and goals, ensuring the loan aligns with your needs.
  6. Navigating complexity: For intricate cases or unusual property types, brokers can help navigate complex lending criteria and find specialized lenders.
  7. Improved approval chances: With their understanding of lender requirements, brokers can present your application in the most favorable light, potentially increasing your chances of approval.
  8. Ongoing support: A good broker offers assistance throughout the loan term, helping with any issues that may arise.

 

By leveraging a broker’s expertise, you can often secure a more advantageous bridging loan while minimizing stress and maximizing efficiency in the process.

Some Bridging FAQs answered:

Is there a minimum amount of equity needed?

Any property will need at least 25% equity. A loan can be secured on more than one property, if needs be.

Is bridging a good idea?

It very much depends on your own circumstances and what you need. 

Bridging can be a very good idea if you need funds quickly or to carry out work to a property you own or are buying.

But is it a good idea for me?

The answer to this depends on you personally, your circumstances and your attitude to risk. 

The equity you have and the reasons for needing a loan will help further answer the question.

Which lenders provide bridging?

There is a wealth of lenders who cover all aspects of bridging. 

From bridging loans to pay off bills to bridging to buy property any legal use is fine.

The lenders we have on our panel will do small to large amounts and will work with borrowers with credit issues, too.

Does my financial health and income matter?

In most cases interest is added to the loan so payments are not required. In these situations your personal income won’t matter.

If you wanted to service a loan, i.e. pay monthly, lenders would assess your affordability to make sure they are lending responsibly.

What if I'm retired?

Being retired is not a barrier in itself to getting a bridging loan.

Whether it suits you will depend on your circumstances and ability to repay the loan.

How about self employed?

No problem here, either.

Most of our clients are self employed developers who use bridging as their main financial tool to fund buying property and work.

Will bridging lenders use land as security

Yes, in some circumstances you can raise bridging on a plot of land.

It would normally need to have planning permission to be suitable but we can even arrange finance where it doesn’t.

Bridging for ground up development projects

If you are looking at doing a ground up project, you’ll need to take out development finance which is another specialist project. 

We can help with this too, go to our page for more information.

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