100% Bridging Loans

Bridging finance helps property investors and other businesses with short-term funding gaps raise money quickly. There is, however, a big difference between standard bridging loans and 100% bridging finance.

Rangewell can help you secure better deals on standard bridging loans or 100% arrangements - but first you need to understand the difference. Let's take a closer look at what 100% means and why it may be right for you. 

What is bridge financing?

A business Bridging Loan is a short-term loan secured against residential or commercial property. This type of loan can be used to buy the property itself or to fund another business purpose altogether. The name for bridge loans comes from the idea that you'll use the finance to 'bridge' a short-term funding gap.

Bridging Loans have a relatively high cost due to the interest rates offered. They are intended to be repaid quickly, either by the sale of the property in question or by refinancing into another finance product designed for the long-term, such as a Commercial Mortgage. They can usually cover around 70% of the total value of the property they are secured on - which means you'll need to have at least 30% of the property's value as a deposit. 

However, in some circumstances, it is possible to arrange 100% Bridging Loans when you have other assets available.

What is a 100% bridging loan?

100% bridging finance is a special kind of loan used when there is no cash deposit to use towards the purchase. Although called 100% bridging loans, they don’t actually allow you to borrow 100% of the open market value - 70 – 75% of the open market value of a property is the usual maximum. However, they do provide two ways to provide 100% finance - either by using another property or asset to provide extra security or (in some cases) if buying undervalue.

So if you wanted to buy a property for £50,000 to renovate and sell but have no available cash deposit, you could use other assets as extra security for the loan.

Alternatively, if you wanted to buy a portfolio worth £1million on the open market, you could use a 100% bridge to buy the properties at a discounted purchase price of £700,000.

Bridging loans are most commonly used to fund property purchases, but there is actually no restriction on how the funds can be used. So if you find you need finance at short notice, a 100% bridging loan secured on property you already own could provide the answer. 

Bridging loans can be arranged fast

Bridging loans are intended to let you deal with urgent funding needs or to take advantage of business opportunities that have to be dealt with fast. All bridging loans can be set up within a matter of hours, and funds released in as little as 72 hours, under certain conditions.

Bridging finance rates: what do bridging loans cost?

You'll always find that short-term finance is more expensive than long-term lending. The costs of bridging finance can actually be relatively high but, because loans are only designed for the short-term, the overall cost of finance may realistically have little actual impact on the long-term costs of a major purchase.

So while there's no real option for a cheap bridging loan, you may find them more affordable than you thought once you begin to consider the full scope of the agreement and the future value of the purchase you're making. 

The interest rates charged for bridge loans will vary, depending on your individual circumstances and your business, and also the deal to be funded. Current rates can range from 0.7-1.5% per month, with even higher rates for more difficult propositions. On top of the monthly interest rate, most lenders will charge an arrangement fee of between 1 – 2% In some cases, an exit fee will also be charged,

It's not just bridging finance rates that need to be considered in terms of overall 'cost' - there may be additional fees from surveyors and legal teams. If your bridge loan runs over the pre-agreed term, you will also be stung for substantial penalty fees.

Repayment arrangements can vary. In some cases, you can have rolled up interest and fees into one loan, which can be settled with a single repayment.

If you are using a Bridging Loan to find a property purchase as a short term solution, it can often be paid off by a product designed for the longer-term, such as a Commercial Mortgage. 

Why you need Rangewell to source your Bridging arrangements

Even a fraction of a percentage point can make a huge difference to what you will actually pay for finance, while fees and penalties can complicate things even further. 

There are many different bridge loan lenders. Each will have their own approach to interest rates and fee arrangements, making it difficult to compare offers without an expert eye.  

Our expert support is essential - making the wrong choices can dramatically affect costs. Our experts can work with you to understand your challenges and use our network of contacts to find the lender with the most competitive solution for your needs.

We can put our knowledge to work for you and deliver results that would otherwise be unobtainable. By offering a combination of first and second charge securitisation we may be able to enable you to take out loans for 100% of the costs and fees of your property, while still benefitting from a market-leading rate.

At Rangewell, we know the lenders who can offer business Bridging Loans, and we can use our expertise and experience to identify the deal that really is the most appropriate for you and your needs. Our knowledge can not only help you secure the funding you need - but it can also save you a great deal of money.

Remember, Bridging Finance is designed for short-term use, but we can help you use it as a tactical source of funding for the short-term, and then work to find the most competitive source of long-term funding to replace it. We can also help with other types of Bridging Finance, including High Value Bridging Loans.

So if you want to look at a 100% Bridging Loan as a solution for your financial needs, contact us at Rangewell.