What is bridging finance?

Bridging finance or a bridging loan works as a short-term loan used to finance the purchase of a property or for business purposes.

If you are looking to purchase a property, a bridging loan provides finance to complete the purchase of the new property while you are selling your existing property. A bridging loan can also provide finance for renovation work or to build a new home while you live in your current home.

Using a bridging loan for business purposes can be a good option, for instance if you are buying something to make a profit. But do remember to factor in the cost of funds into your profit figure

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What can bridging finance be used for?

Now that we’ve seen how does bridging finance works, let’s examine what a bridging loan can be used for. The main advantage of bridging loans is that they are a highly flexible source of funding.

In terms of residential property purchasing, bridging finance can assist with both downsizing and upsizing, providing finance for UK and foreign property purchase, buy to let, HMO and other investments. Bridging finance can also help fund property developments, from light refurbishment loans for unmortgageable properties to heavy refurbishment loans such as change of use, extensions, basement digs, loft conversions, commercial to residential and commercial developments. Bridging finance can also be used as short-term finance for UK expats to secure a residential or investment property back in the UK.

How much does bridging finance cost?

So now you know what is bridging finance and how does it work, let’s look at likely costs of a bridging loan. Bridging loan costs typically include arrangement fees and these usually amount to a percentage of the loan. Around 2% is standard, but some lenders may drop to 1% if you take out a particularly large sum. Other lenders may waive this fee entirely, but this is rare.

How much deposit do you need for a bridging loan?

As a borrower, you will be expected to provide around 25-30% of the deposit yourself.

Bridging loans usually come with a max LTV of 75% of the gross loan (that is, the loan amount with all of the fees and interest added). So, for example, if your property was valued at £400k, the maximum loan would be £150k.

Where can you get a bridging loan? 

Banks that offer bridging loans include NatWest, HSBC, Bank of Scotland, Barclays, Halifax, Lloyds, RBS and Santander. You can also approach mortgage brokers and specialist lenders which provide bridging loans. If you require bridging finance, usually your current lender is best placed to assist. These loans are not always easy to get, so you will need to discuss your situation directly with your bank and set out exactly what’s being offered in a deal. If your lender does not offer bridging loans, you may need to find a new lender. In this instance, the new lender may insist on taking on any existing loans, which means paying out your existing lender.

What are the risks of bridging loans?

There is an inherent risk associated with using bridging loans. For instance, if you are using a bridging loan to help fund a property purchase before you have sold your current hoouse, as the bridging loan interest is capitalised monthly on the home loan, the longer it takes for you to sell the property, the more in interest you’ll pay. In addition, you may end up selling your property for less than you expected, which will leave you with a higher home loan balance than you initially planned.

So while bridging finance has its uses, if you don’t have a realistic exit strategy, such as a buyer lined up for your own property, bridging finance is extremely risky and should be avoided at all costs. Lenders will want to know how you intend to “exit” the loan, that is, how will you eventually repay it.

Masutes Group bridging loan services

In this short overview of bridging finance, we have looked at what is bridging finance & how does it work, how much does bridging finance cost and some of the risks associated with bridging finance. So how can Masutes Group help?

As an independent, whole of market broker, Masutes Group provides a specialist bridging finance service. We provide access to market leading bridging loans from £50,000 to £25m with finance up to 90% of purchase price or 70% of open market value and LTVs up to 80% (more depending on availability of other assets). We will help you assess your financial position, plan and then deliver a suitable exit strategy for you. And you’ll find our fees are very competitive!

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Please check our reviews to see how we seek to exceed the highest expectations of our customers.

Ashish Srivastava
Ashish Srivastava
2022-03-04
Andrew Lochrie
Andrew Lochrie
2022-03-02
Pav and his team at Masutes supported us recently to a successful conclusion in our house purchase journey. As first time buyers he helped walk us through the whole process including giving us introductions to other professionals needed to complete the process who have proven up to the recommendations provided. Masutes brought their market knowledge to bear and were able to find us a mortgage tackling some challenging features and requirements as we have spent some time living abroad before purchasing and have a high loan to value. Their promise that they have never failed to get a successful conclusion for their client prove true again for us and we would certainly commend them for their attention to detail, proactivity and responsiveness to our natural apprehension as we went through the process for the 1st time. We will certainly return to Masutes in the future.
Matthew Herbert
Matthew Herbert
2022-03-01
Have work closely with Pav and would highly recommend. Very knowledgeable and really does put is clients first (rare to see)! Key person to have in your power team!!
kia dashtipour
kia dashtipour
2022-02-07
Great experience working with them, they are available all the time.
Animesh Tiwari
Animesh Tiwari
2021-12-13
The Best financial broker in the market across the UK. I met Masutes Group after exploring the market and when I met Pav, I decided that he is the person who is ready to invest their time in my case. He made the entire process look so simple and gave me the much need confidence and support and ensuring I get the best deal available in the market. Even when I was not sure with some decision making Pav ensure I go for the thing which is right for me. Extremely reliable and responsive. In the entire UK market - Pav and Team is the best as they not only provide professional service but also by going extra mile, giving personal attention which separate them from others in the market. Pav and Team has exceeded my expectation in all the possible parameters. Feedback from my friends to whom I have already referred Masutes Group is amazing. If you ever want financial advice or suggestion/guidance - just speak with Pav once, you will never go anywhere else and I am saying this with my personal experience. Ani
Adil T
Adil T
2021-11-22
It has been a great experience with masutes group to get our mortgage secured. From finding a right property, putting an offer in, getting the mortgage principal to final mortgage offer were made very straightforward by Pav and the team at Masutes group. They communicated very clearly throughout the journey and updated us with all the information in timely manner. Pav dealt everything in such a manner that he put me in ease. If someone is looking for the best mortgage deal with the top quality service, then Masutes group will provide that one stop service. Highly recommended. Thank you so much Pav for all your help and support 😀.
Mimoza Billa
Mimoza Billa
2021-09-21
I strongly recommend Masutes Group specifically Pav for his professionalism and reliability.
Caroline Shallow
Caroline Shallow
2021-09-21
Masutes Group has been amazing throughout the entire process, it has been a long road for us but we have always been made to feel that there is hope, these actions shone through and we were more than overjoyed with the results and professionalism. We will definitely be using MG again and can recommend highly!
Eliseu Pinheiro da Silva
Eliseu Pinheiro da Silva
2021-08-26
Pav has the patience of a saint! Given the state of the market at the moment, getting an offer accepted is near impossible and is a lengthy and tiresome process . I can confidently say that Pav was with me every step of the way and helped navigate me through the complicated and at times confusing process . His practical advice and reassurance when I was ready to give up after 20 viewings finally paid off ! I trust this gentleman wholeheartedly. He’s a good guy, very professional and thorough , and most importantly , in such an inflated market , he’s quick to respond and reliable! He genuinely cares about his clients and even advised me not to follow through with an offer I had accepted as he could tell that I wasn’t 100% convinced that the property was a good fit . A week later I went on to secure a property with Pav’s help that was just perfect and I am delighted . My advice is go with Pav and his recommendations , you will not be disappointed!
noel ohene
noel ohene
2021-08-10
Great service always put there clients first and goes on and beyond I’m very please with the quality of work and I wouldn’t hesitate using there services again. Thank you!!

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