- What is a bridging loan?
- Who can apply?
- Who might use a bridging loan?
- Do you only lend on specific types of properties?
- Is there any employment criteria for the borrower?
- How long can a bridging loan be taken out for?
- How much can be borrowed?
- What is the difference between a first and second charge loan?
- When will my client find out if their application has been successful?
- How long will a bridging loan application take to complete?
- Is my client subjected to a credit check?
- What is the process once the application has been sent?
- Are there any upfront fees?
- What interest rate will the client pay?
- Can the loan be repaid early?
- What is an exit route?
- What commission do Aura Finance pay to intermediaries on a bridging loan?
A bridging loan is a short-term interest-only loan available to those that need immediate access to capital. Usually used for a property purchase, it is a loan to ‘bridge’ the gap while other finance (such as a mortgage) is secured by the borrower. Bridging loans are secured, meaning the borrower uses property (or land) as security to the lending institution.
Any individual or limited company can apply for a bridging loan.
Bridging loans are mainly used by clients that need quick, short-term capital to fund a property purchase. They include those who:
- need to complete quickly. This might include property developers, who often have the opportunity to secure a great deal if they can complete quickly.
- buy through a property auction. Bridging loans are popular with those buying property at an auction. Here, completion has to take place within 28 days which means traditional financing is not usually an option.
- are in a broken property chain. A bridging loan enables a seller of one property to secure their new property before the sale of their existing property goes through.
- want to buy an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). A bridging lender will base its lending on the property’s value in its current condition, however. This means the buyer can get access to the property and work on it to make it habitable.
- are renovating or developing a current property. A property investor may want to renovate a property within a few months and either sell it on or refinance. A bridging loan can often be the perfect vehicle for this short-term capital requirement.
- have to get planning permission. In order to obtain planning permission and secure development funding, the developer may need immediate access to capital.
- need a lease extension. When a property has a short lease a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.
Aura finance can lend on Residential and Semi Commercial properties in England and Wales, with most construction types considered.
Typically 12 months.
Typically, the minimum amount that can be borrowed for a bridging loan is £30,000, with a maximum of £3.5M.
A ‘first charge’ is the primary mortgage or loan secured against a property. This takes precedence over all other finance secured against it. If there is sufficient equity in the property, however, then a ‘second charge’ loan could be secured against it.
Our experience means that in most cases we will be able to confirm almost straightaway whether your client’s application is likely to be successful.
From the initial enquiry through to completion, our average turnaround time is just two weeks. However in certain circumstances, Aura can complete in a matter of days.
Yes, however we manually underwrite every case and do not simply rely on score based decisions.
Once we receive the application form (and the certified identification documents) we will issue indicative terms, which need to be signed by the client. We will then book a valuation. Once the valuation report is completed, we will instruct our solicitor to carry out all due diligence and provide a report. Funds will then be sent to the solicitor for completion.
As a lender no, however you will likely have to pay for a valuation to be performed that will be instructed by us.
Please see the Product section, however we can tailor our rates based upon your specific requirements and circumstance.
Yes. Once the borrower secures longer term funding then the bridging loan can be paid early without penalty in most cases.
As bridging loans are for the short-term, each client must have a plan in place to pay off the loan. This is known as an ‘exit route’. A viable exit route is a must on all bridging loan applications.
Our long-standing relationship with lenders and high loan conversion rates means we are able to offer intermediaries some of the best commission rates in the market. Commission is typically around 1% of the loan amount. (There is a minimum payment of £1000.)