“Bridging loans” or “bridging” or gap loans are designed as a short term finance solution, secured against residential or commercial property.
Typically they are used where speed is essential, the property is being sold under-value or for whatever reason the deal falls outside of standard term lenders criteria e.g. not classed as inhabitable, due to the lack of a kitchen.
Unlike term lenders that are going to work off purchase price, most Bridging Finance providers work off the open market value (OMV).
Bridging finance lenders are really concerned with three elements:
- Open Market Value, as verified by a R.I.C.S. surveyor. If you have had a recent valuation carried out by an R.I.C.S member, some bridging finance providers will accept a re-type of the valuation
- Treatment of interest – are you going to service the interest during the bridge or “roll it up” into the facility
- Exit strategy- A realistic exit strategy is required from outset, be it sale or re-finance to a long term lender.
There are minimal or no status requirements, depending on whether you intend to service interest or not.
Bridging occupies a unique place in the market, and over the next couple of years the demand for it will no doubt increase, due to some of its more adventurous applications.