Need more information about bridging loans for development?
Whether this is your first time seeking this kind of finance or you’re an experienced developer looking to expand your portfolio, it’s always worth reviewing all the information.
A development bridge loan affords you flexibility. With Rapid Bridging, we’re confident that we can provide you with a quick turnaround. To arrange loans, we’ll tap into our pool of specialist lenders that have appetite. These are not like typical, mainstream lenders that will only provide traditional mortgages, which are not suitable for a lot of development projects. Bridging loans for development properties can be arranged within as little as 48 hours in some cases.
With a property development project, getting from start to finish as quickly as possible without sacrificing quality is important to ensure both viability and profitability. With a traditional mortgage, you will be charged an early redemption penalty if you either sell the property within the tie-in period or switch to a standard residential or commercial mortgage (whether buy-to-let or owner-occupier).
A short term finance solution like a bridging loan does not feature these tie-ins.
In fact, with a short term bridging loan, you only pay interest until the day you repay the loan (except for the first 30 days during which a month’s interest is payable)
The costs involved in purchasing then refurbishing or renovating commercial or residential property are significant. Budgets required for new-build properties can be even greater. Few property developers will be able to attract the lump sum funding they need from investors but, for most, this is not an option.
In this situation, they need to look for competitive external funding from established bridging lenders instead. Development bridging loans are used to fund the purchase of property and land, the renovation/refurbishment of existing property, or the demolition of existing property and its replacement with new build property.
Development bridging finance can be used on projects involving residential properties, commercial properties, or semi-commercial properties.
A bridging loan is a specialist form of finance used to supply the money needed to start a property development project and complete it. And, because you don’t need to make monthly repayments towards the “capital” (the amount you borrowed) and the interest (the charge for borrowing the capital) if you don’t want to, you can free up more of your cash to finish your project.
Repaying A Bridging Loan Used For Property Development
You repay the capital you borrow at the “exit” event. On bridging loans for property development, the “exit” event is the event which generates the money required to repay your lender.
You can choose to make monthly interest repayments on your loan or you could roll up the interest instead and pay it off at the “exit” event with the capital – the latter is the preferred choice for most property developers for better cash flow management.
If you intend to sell the property you’ve purchased following project completion, then you use the funds from the sale to repay your loan.
If you intend to rent out the property following project completion, you’ll then need to arrange a residential or commercial buy-to-let mortgage. Your mortgage lender will then repay the outstanding bridging loan balance on your behalf.
If you intend to move into the property following project completion, then you need to arrange a standard owner-occupier residential or commercial mortgage to repay your development bridging loan lender.