Over the previous five years, the number of bridging lenders has expanded significantly, making Bridging Loans up to £2 million more accessible and elevating bridging financing from a last option to a must-have instrument in your development arsenal.
However, if you require a substantial Bridging Loan exceeding £2 million to fund transitory assets or release equity from a house, your alternatives narrow drastically, and you’ll almost certainly need to explore outside of the major lenders.
We’ve compiled a list of five things you should know before diving into the big world of large Bridging Loans.
1. The use of large bridging loans is becoming more prevalent.
It is feasible to acquire jumbo loans if you have the necessary connections and experience to negotiate customised solutions. For an international property investor, we recently acquired a £25 million bridging loan. He intended to borrow £28.5 million to buy a new home and use his present home, worth £19.1 million, as a co-signer on the loan. Borrowing against two “trophy” houses resulted in a narrow pool of interested lenders, but we overcame a slew of obstacles and closed in four weeks, allowing the client to move into their new home.
2. They aren’t as pricey as you may believe.
Even among seasoned property developers, there is a widespread belief that bridging loans, particularly large ones, are too costly. However, as the industry grows in popularity, there are more lenders to choose from, which leads to better pricing. Furthermore, if obtaining a substantial Bridging Loan allows you to purchase the property that is perfect for your portfolio at the correct price and in a timely manner, you will save money in the long run.
3. It’s all about who you know.
You should go outside the traditional banks to specialised lenders for substantial bridging loans. The bigger the loan, the fewer lenders you’ll have to choose from, so do your homework and shop around for the best options. Because they may be difficult to come by, contacts are more important than ever when it comes to large bridging loans. Using a broker may help you not only search the whole market, but also connect you with people who are ready and competent to deal with unusual development scenarios.
4. They’re a fantastic way to get into development.
Large bridging loans may turn development sites that were once deemed to be impossible into a reality. With a stub-lease and allowed development rights, we assisted a client wanting to acquire a retail unit and offices. He intended to lease the property for two years before turning it to residential or redeveloping the whole property. The lender needed more confidence about the expected construction costs and GDV. We were able to get a substantial Bridging Loan of £8.4 million at 70% LTV by working closely with all stakeholders, and the lender agreed to paying 100% of the planned construct costs, subject to QS reports and valuations.
5. Bridging loans are a kind of development exit finance.
Development Exit Finance is a short-term loan used to discharge remaining debt owed on a property development project after it has been completed. It’s an excellent tool to have on hand if your current financing is coming to an end and your sales aren’t going to be finished on time. Reduced risk means it costs less than Development Finance, buys time and eliminates the need to slash prices for rapid sales, and frees up equity to finance your next project, making it a win-win situation.
If you’re considering a bridging loan and are looking for advice, contact us for a no obligation chat.