Bridging loan examples: different ways to use bridging loans
Get rates and instant quotes for our whole bridging loans on our product page.
Bridging loans are a popular form of finance for property investors, developers and professionals because of their flexibility to cover all manner of scenarios.
Pre, during and after your project, bridging loans support projects to keep moving.
Here are some examples of how bridging loans can be used in different property projects.
Bridging loan example 1: Residential bridging
The most common form of bridging loan is for the purchase of residential properties, either for refurbishment or planning gain if the property comes with a large plot of land.
Bridging loan example 2: Bridge-to-Let
Another form of residential bridging, Bridge-to-Let serves portfolio landlords to purchase and carry out light refurbishments on properties that are not quite ready for the rental market. Once refurbishments are made the borrower can then refinance on to a Buy-to-Let mortgage.
Bridging loan example 3: Commercial and land bridging
For the purposes of purchasing land or commercial units for development or planning gain.
For developers, bridging finance is a quick way to secure their next site. Examples include a quick purchase via an option agreement, enhancing the current planning to build up additional value, or to hold the site enabling professionals to be mobilised before it transfers to development finance.
These loans can also be used for planning gain, using the life-time of the bridge to obtain or enhance planning permission before selling to a developer with the uplift in value.
Bridging loan example 4: Auction finance
Bridging loans for auction finance happen post-auction, with lenders wanting to know the property, plan and exit strategy before lending. This means borrowers often require the money quickly in between having a bid accepted and completing on the project, which is where bridging finance is valuable.
Even if the long-term plan is to use the property for renting, a bridging loan ensures the property investor can secure the property in a timely fashion and finance any small refurbishments.
Bridging loan example 5: Refurbishment
Smaller bridging loans for refurbishment are often used to add value to an investor’s property portfolio, whether it is to fund conversions or extensions before selling or refinancing into a MUFB or HMO Buy-to-Let.
Bridging loan example 6: Development Exit
When a development reaches practical completion the developer may have had unforeseen delays to the scheme and therefore hasn’t managed to sell all of the units to clear the current development loan. A Development Exit bridge is a way of biding more time for sales and marketing, whilst also potentially reducing the overall cost of the loan at a higher LTV.