Why use bridging finance?

Bridging finance is a solution for a funding need. Often this can be to address a shortfall in the funds needed to complete a transaction, for example chain-break. Bridging finance usually lasts between 1-12 months.

At Crystal, we have experience supporting brokers who seek this type of loan for a range of scenarios, from auction purchases with tight completion deadlines to funding renovation and development projects or even purchasing a new home before the current one sells. This flexibility makes bridging finance a valuable tool for brokers to help meet client’s needs quickly.

This loan type is commonly referred to as bridging finance or bridge loans.

Types of bridging finance

Bridging finance is a solution designed to meet your client’s needs, therefore there isn’t a one size fits all approach. It can include both regulated, and non-regulated options.

Regulated – Typically for residential property and domestic homeowners, in need of funds fast, e.g. for their primary residence or personal use.

Non-regulated – Typically used for business or commercial purposes, e.g. for investment properties or complex transactions.

How does bridging finance work?

Application – To qualify for a bridging loan, your client must have a property in which the loan can be secured against.

Loan Amount – The amount that can be borrowed under a bridging loan is typically based on the value of the property used as security. The loan-to-value (LTV) varies on the nature and state of the property. At Crystal we can source lenders offering LTVs up to 85%, depending on property condition and client profile.

Loan Term – As a bridging loan is designed to be a short-term funding solution, terms typically last between 1-12 months. Your client will need to have a clear exit route, for when the loan term ends, such as selling the property or refinancing. Some non-regulated lenders will allow a term of up to 36 months.

Repayment – Your client has a number of options to repay the loan at the end of the term requested. Your client can either plan to repay the entire bridging loan amount (including interest) at the end of the loan term or pay interest monthly (non-regulated lenders only) with the principal balance repaid in full at the end of the loan term. Failure to repay the loan could result in the lender repossessing or selling the property to recover their funds.

Pros & cons of bridging loans

As with all forms of lending and financing, bridge loans come with advantages and disadvantages. It is important to be aware of these before borrowing.

Pros

• Quick access to funds – Ideal for purchasing a property, fast.

• Helps to secure a property before selling a current one – Perfect in competitive housing markets.

• Flexible loan terms – Short-term repayments work well for those needing temporary funding.

• Versatile for various scenarios – From auction bridging to refurbishment/development projects, offering versatility.

• More accessible than traditional loans – Particularly for clients with complex situations.

Cons

• Higher interest rates – Rates of 0.5%-1.5% per month, can mean a high APRC.

• Owning two properties at once – Managing two mortgages can be stressful.

• Risk of repossession – Since a bridging loan is secured against a property, failure to repay can result in repossession, additional charges and interest.

• Requires a clear exit strategy – Whether this be the sale of the property or securing long term financing.

When a bridging loan might be required

There are a whole range of situations where a bridging loan may be required.

• Buying a new property before selling the current one

• Auction purchases

• Refurbishment or development projects

• Time sensitive property deals

• Covering short term cash flow gaps

• Resolving inheritance or legal delays affecting property transactions

Key considerations before taking out a bridging loan

When considering a bridging loan, it is important your clients understand all the details, including the lender terms and any associated risks.

• Interest rates and fees – Bridging loans often have higher interest rates (typically 0.5%-1.5% per month) and may include lender fees, exit fees, valuation fees or legal costs. At Crystal, we charge no upfront broker fees however the lender may charge application fees, arrangement fees or exit fees.

• Loan term and exit strategy – As bridging loans are short-term, it is crucial to have a clear planned exit route, whether this be the sale of the property or a refinance option.

• Clear repayment plan – Lenders may offer rolled-up interest (paid at the end of the term) or monthly interest payments. Asses which option suits your client’s needs.

• Client sustainability – Ensure the bridging loan aligns with your client’s financial objectives and circumstances, as bridging may not be suitable for all clients.

Bridging loan scenario

We are experienced in providing flexible solutions for almost any scenario, and source bridge financing on a daily basis.
Here’s just one example…

A client needed help with the purchase of a student halls property at auction. The loan was secured at 75% LTV.
Within 4 weeks, we had secured a bridging loan of £2.1M!

Click here to read the full story and see how we made it happen.

For more bridging case studies, click here.

How specialist lenders can help

Crystal is a bridging finance specialist, and we work with an extensive panel of specialist lenders to find the best bridging deal. We can help you with packaging the loan yourself or advising on it through our referral service. What’s more, you’ll have access to semi-exclusive rates and offers that you’ll struggle to access elsewhere, and we’ll beat any non-regulated bridging quote like-for-like!

• Save time – We’ll reach out to our lenders on panel and find the deal best suited to your client’s needs.

• Avoid feeling overwhelmed – Obtaining bridging finance can be stressful, but Crystal can ease the pressure.

• Long-term relationships with specialist lenders – We know our lenders processes inside out, which helps speed up the process.

If you’re interested in finding out how we can help with a bridging loan, call us on 01827 337710 or enquire through our CrystalHUB. Alternatively, you can email us at enquiries@crystalsf.com.

We recommend verifying lender credentials and terms independently for due diligence.

Bridging finance FAQs

What is a bridging loan, and how does it work?

A bridging loan is a short-term funding option used to ‘bridge’ a finance gap until a longer-term solution can be arranged. It provides quick access to funds, often used for auction purchases, refurbishments or development projects.

When would your client need a bridging loan?

Bridging loans are useful when your client needs fast funding, such as buying a property at auction, funding renovations before refinancing or securing a new home before selling their current one.

How quickly can a bridging loan be arranged?

This varies depending on your client’s needs. At Crystal, we work with a wide range of specialist lenders to find a speedy solution. The quickest bridge we’ve completed from application to funding was a remarkable 8 hours!

How are bridging loans underwritten?

Different from a high-street mortgage, bridging loans are underwritten with a less formal criteria, focussing on the feasibility of your client’s exit strategy (e.g. property sale or refinancing) and the quality of the asset offered as security.

What types of properties can be financed with a bridging loan?

Bridging loans can be used for residential, commercial and mixed-use properties, including those that may not meet traditional mortgage lender criteria.

How much can your client borrow with a bridging loan?

The loan amount depends on factors such as the value of the property, loan-to-value (LTV) ratio, and client profile. At Crystal we can offer LTVs up to 85%.

What are the typical interest rates for bridging loans?

Rates typically range from 0.5% to 1.5% per month, depending on the lender, risk and loan term. Crystal can provide tailored quotes and help you package a case yourself.

Does your client need to make monthly payments on a bridging loan?

Many bridging loans have rolled up or full term deducted interest, meaning interest is added to the loan and repaid at the end of the term. Monthly payments may be required, depending on the lender and their terms (only available on non-regulated loans).

What are the repayment options for a bridging loan?

Bridging loans are typically repaid through refinancing with a long-term mortgage, selling the property or securing alternative funding.

What’s the difference between an open and closed bridging loan?

• Open Bridging Loan – No fixed repayment date, but usually repaid within 12 months

• Closed Bridging Loan – A fixed repayment date is agreed upon, often when a sale is already in progress

Can your client get a bridging loan if they have a poor credit rating?

Yes! Many specialist lenders accept applications from those with adverse credit, provided there’s a clear exit strategy and sufficient security.

What fees are associated with bridging loans?

In addition to interest, fees may include:

• Arrangement fee (typically 1-2% of the loan amount)

• Exit fee (if applicable, usually 1%)

• Valuation fee

• Legal fees

• Broker fees (if a broker is used)

Can a bridging loan be used to fund property development?

Yes! Bridging finance is commonly used for light and heavy refurbishments, conversions, and some ground-up developments before securing long-term development finance.

What security is required for a bridging loan?

Bridging loans are secured against property, which could be a residential, commercial, or mixed-use asset. Some lenders accept multiple properties as security (cross-collateralisation).

Can your client get a bridging loan if they are self-employed?

Yes! As a specialist, Crystal offers solutions for self-employed clients, business owners, and those with complex income structures, as long as there is a clear repayment plan.

What is the difference between first-charge and second-charge bridging loans?

• First-charge bridging loan – The lender has the primary claim over the property if your client fails to repay the loan.

• Second-charge bridging loan – The lender ranks behind an existing mortgage lender and takes second priority in repayment.

Does your client need a deposit for a bridging loan?

Yes, most lenders require a deposit of at least 25%. However, additional assets can sometimes be used as security to reduce the deposit needed.

What happens if your client can’t repay their bridging loan on time?

If they cannot repay the loan by the agreed term, lenders may:

• Offer an extension (subject to terms and fees)

• Allow refinancing onto a longer-term product

• Start repossession proceedings if no resolution is found