What is an Open Bridging Loan?

Bridging finance is a temporary loan arranged on a non-status basis. Loans are offered against the value and equity available in your property ignoring your income and credit status when arranged via a specialist lender. Bridge finance from a bank can usually only be offered on typical banking terms, income and credit checks, i.e. a full status loan.

There are two bridging finance options, these alternatives are referred to as either an "open" bridge or a "closed" bridge. Open bridging finance, the focus of this page, is available where there is no pre-arranged, guaranteed exit for the lender, although the actual exit route may be known, for example build and sell a new property. A standard rate, low cost, second charge secured loan choice could be utilised by home movers where timescales permit, however one needs to watch for minimum term periods and potentially hefty early redemption penalties. Closed bridging finance is available where the exit route for the lender is assured as longer term finance is agreed and is waiting for some other event, such as a property chain, to allow completion. Typical lending periods for bridging finance is between 1 & 12 months.

The following circumstances suit an "Open Bridge":-

Bridging Finance to purchase a derelict property

A derelict property has been purchased and is either not mortgageable or is subject to partial or even a full retention until specific repairs have been made. A short term loan option will facilitate the purchase and repair allowing your mortgage lender to complete the transaction.

Loans for Planning Gain

This example can help with the purchase of land or property that will show significant gains should planning consent be obtained. Additional security may be required, without which interest will probably need to be paid monthly.

Bridging Finance for Property Developers

Bridging Finance will allow a developer to quickly acquire a commercial or residential property for development, conversion or refurbishment purposes. The developer can then decide whether to sell or re-mortgage via a lower cost buy-to-let mortgage and therefore repaying any outstanding balance depending on the up-lift in value to the property.

Loans to move home prior to the sale of your current home

This is a conventional "home movers" bridging loan whereby the purchase of a new property takes place prior to the sale of the existing one. By taking a first legal charge over the new property and a second charge over the old property, a bridging lender could release funds for the full purchase price, depending on the equity available in your current property. Redemption of the loan amount would be via the sale proceeds of the old property and mortgage on the new. Equity in a UK home could allow the fast purchase of a holiday home overseas!

Raise Capital For Your Business

There may be times when your company needs access to capital quickly, for instance, to take advantage of an opportunity or pay a tax bill. In these circumstances a high-speed bridging loan secured against your commercial property could be the ideal, fast solution you require. Interest roll up will be available up to the lenders maximum "loan to value".

Property Purchased at an Auction

Auction purchases often need to be completed within 28 business days, sometimes as little as 14 days. Where a mortgage has not been pre arranged a loan via an open bridge may well be the only viable solution available.