Large Bridging Loans

If you’re looking for a short-term cash flow solution to fund a big property purchase or renovation project then a large bridging loan could be just what you need.

In this article we’ll look at what large bridging loans can be used for, the key things to consider before you commit and why a specialist broker is a must if you’re applying for one.

What is considered a large bridging loan?

There is no official definition of what specifically constitutes a large bridging loan. It’s really down to the discretion of the individual lender, although many apply an arbitrary threshold of £1 million when talking about high value bridging finance.

If your bridging loan is considered large then it will likely mean more due diligence as well as a more flexible, case-by-case assessment process.

Unlike with traditional mortgages, your income and your credit score are less important. Instead lenders are looking primarily at what collateral you have to back the loan, and how you intend to repay it, so they’ll want to see a very clear and strong exit plan. If you’re looking at a large bridging loan for property development for example, a good track record in developing properties will give a lender more confidence in your application.

Uses for large bridging loans

Larger bridging loans are normally associated either with high net worth individuals or commercial developments, and can be used for anything that requires a hefty short-term investment with a clear end date.

The key thing is that you have a solid exit strategy, usually the pending sale of another property, the sale of the new property or premises after development, or securing a mortgage. It may be that you simply don’t have time to get a mortgage in place or it could be that you’re buying a property that’s currently uninhabitable and so not eligible for a mortgage until you’ve undertaken refurbishments.

Examples include:

• The purchase of a luxury residential property while the sale of an existing property goes through
• Buying at auction, where a traditional mortgage can’t be arranged quickly enough
• Adding to an investment property portfolio while waiting on another transaction to free up cash
• Property developments e.g. buying an old building and converting it into apartments
• The development of office complexes or business premises

Large bridging loan calculator

Use our large bridging loan calculator below for an approximate idea of how much your monthly repayments could be. Simply enter the details for the loan amount, property value and term length. You can also input different interest rates to see how your payments could change depending upon the rate you can get from different lenders.

How a broker can help

Using a specialist bridging finance broker is vital when it comes to securing a large bridging loan. Most of the lenders offering these high value loans, particularly those lending to commercial projects, are not regulated by The Financial Conduct Authority, therefore they’re classed as unregulated. So, without the help of someone with in-depth expert knowledge you simply won’t be able to access the whole of the market and get the best deals.

Large bridging loan applications are typically assessed on a case by case basis and there won’t be a ‘one rate fits all’ policy. Your broker can help you explore all of your options, including looking at things like securing your loan against a small portfolio of properties rather than one, and then act as a negotiator on your behalf to get you the best possible terms.

Given the high interest rates on bridging loans, the smallest reduction in rates can mean saving huge amounts of money on a large loan, so it really is worth it.

Which lenders offer large bridging loans?

High street banks are not the place to go for large bridging loans. Most of the lenders willing to offer this type of finance will be unregulated, non-traditional lenders – not the sort of organisations you find through a quick internet search.

Many of them are bridging loan specialists, focussing specifically on short-term finance for residential or commercial property development. They work on a bespoke basis and will likely be more flexible than traditional lenders, especially if you’re using a broker.

What are the costs and typical rates involved?

The main thing to remember when considering a large bridging loan is that it’s expensive, not just in terms of the interest you’ll pay – which is calculated monthly – but also the additional costs. Many people consider bridging loans a last resort, but if it’s a good fit for you just make sure you’re very clear from the start of the full cost.

Let’s take an example of a £3 million bridging loan, taken over 12 months, with a LTV of 75% and a monthly interest rate of 0.67%. This rate has been chosen purely for example purposes and may not be representative of what is available on the market right now.

Monthly interest on this would be £20,100, meaning you’d pay £241,200 over the 12 month term. On top of this you’d also pay an arrangement fee, usually 2%, so in this case £60,000. You can also expect to pay:

• A valuation fee for the property or properties you’re using to secure the loan
• Legal fees
• Exit fees

In this example the total cost of the £3,000,000 loan would be over £300,000 – over 10% of the amount being borrowed.

You may also find that the higher the loan amount you’re looking for, the bigger the percentage deposit required by lenders will be, so that’s something else to factor in. Also keep in mind that because a bridging loan is secured against one or multiple other properties, these are at risk if you’re unable to repay the loan.

Although fees and costs can be high, keep in mind that a specialist bridging finance broker could help you save money on your loan and avoid unnecessary charges.

Interest rates

Take a look at our rates table below to get an idea of the current deals available for bridging loans. Please note that all rates cited are monthly ones and are subject to change.

Get matched with a specialist large bridging loan broker

When you’re dealing with such huge sums of money, you really do need the support of a broker who’s an expert in large bridging loans. A broker with in-depth knowledge of this market will have existing contacts with the specialist lenders and be able to take you straight to the best matches for you, saving you considerable time and money. In the case study above for example, even just finding a rate of 0.65% rather than 0.67% would save you over £7,000.

Call 0808 189 0463 or make an enquiry and we’ll quickly assess your needs, match you with a specialist large bridging loan broker and set up a free, no-obligation chat.