It is probably fair to say that many people learn about short-term residential property loans by default. The most common scenario occurs when they are looking to purchase a new property but either cannot sell their existing home or the sale falls through due to a break in the chain.
At this point, when purchasers are suddenly faced with the potential loss of a property that they have set their heart upon, a short-term loan can save the day by “bridging the gap” between the sale and purchase of properties. This is arguably bridging finance in its purest form and the origin of “bridging finance” as a generic term alongside short-term lending. In this situation the loan will generally be repaid when the purchasers existing home is sold, usually within a matter of months.
Beyond the classic bridge highlighted above there are of course infinite variations. Residential short-term or bridging loans can also be used to repay debt, purchase new investment properties or even for home improvements. They will always be regulated by the Financial Conduct Authority (FCA) if they are secured against what is or has previously been a borrower’s primary home residence.
These loans can also be used for the renovation of a property which can be particularly useful in instances where traditional High Street lenders will often refuse to lend when they deem a property to be uninhabitable.
Many specialist bridging lenders will base their loans upon the market value of security properties as opposed to calculating their loan to value (LTV) calculations purely upon the purchase price, which is the case with many High Street lenders. This can make quite a significant difference to the size of loan that can be secured.
Specialist bridging lenders will typically offer residential loans of between £100K and £2M although some will go both below and above these thresholds. Likewise, repayment periods are typically between 3-12 months although, once again, certain lenders will offer both shorter or longer terms. These loans are an incredibly flexible tool that can enable homeowners to realise their ultimate ambitions.
Yes. Any advice that concerns a property which you have ever lived in is regulated by The Financial Conduct Authority and your broker must be registered by the FCA.
No. Some brokers specialise in complex bridging finance for property developers and as such choose not to offer regulated residential property loan advice.