How Fast Can a Bridging Loan Complete in the UK?
In the UK property market, timing can be critical. Property investors, developers and landlords may need access to funding within a shorter timeframe than is typically available through conventional property finance.
Bridging finance is a short-term, property-secured funding solution that can be used to bridge a temporary funding requirement until an agreed exit strategy is achieved, such as the sale of a property, refinancing onto longer-term finance or completion of a development project.
At Ponte Finance, we focus on property-backed bridging finance for business and investment purposes. This guide explains the typical stages involved in a bridging transaction, the factors that may influence completion times and how borrowers can help keep the process moving efficiently.
What Is a Bridging Loan?
A bridging loan is a short-term loan secured against property or land.
It may be suitable for property investors and developers who require funding for circumstances including:
- property acquisitions;
- auction purchases;
- refurbishment or development projects;
- temporary funding gaps;
- refinancing;
- chain-related transactions; and
- other time-sensitive property opportunities.
Bridging finance should not be considered solely because of speed. The suitability of any facility will depend on the property, borrower, proposed use of funds, security, loan-to-value, exit strategy and overall circumstances of the transaction.
How Quickly Can a Bridging Loan Complete?
There is no guaranteed completion period for a bridging loan.
In suitable and relatively straightforward cases, bridging finance may complete considerably faster than conventional property finance. Some transactions may potentially complete within days, while others may require several weeks or longer.
The actual completion time will depend on factors including:
- underwriting;
- availability and quality of documentation;
- property valuation;
- legal due diligence;
- title and security;
- borrower circumstances;
- the proposed exit strategy;
- transaction complexity; and
- the responsiveness of all parties involved.
Any timescales referred to in this article are therefore indicative only and should not be treated as a guarantee that funding will be available by a particular date.
Typical Bridging Finance Process
1. Initial Enquiry and Indicative Terms
The borrower provides initial information about the proposed transaction, including the required funding, security property, purpose of the loan and intended exit strategy.
Where the proposal appears to meet the relevant lending criteria, indicative terms or an Agreement in Principle may be considered.
Any indicative terms or Agreement in Principle are subject to underwriting, satisfactory valuation, legal due diligence, documentation and final approval and do not constitute a binding commitment to lend.
2. Application and Underwriting
Further information and supporting documentation will normally be required.
Depending on the transaction, this may include:
- identification and verification documents;
- information about the borrower or borrowing entity;
- details of the property being offered as security;
- evidence relating to the proposed transaction;
- development or refurbishment information where applicable;
- source of funds information;
- financial information; and
- evidence supporting the proposed exit strategy.
Each application is assessed on its individual merits.
3. Property Valuation and Legal Due Diligence
A valuation of the proposed security may be required.
Legal representatives will also undertake the appropriate due diligence relating to the property, title, security and transaction.
This stage can materially affect the completion timeline. Issues involving title, leases, existing charges, planning, property condition or complex ownership structures may require additional investigation.
4. Formal Loan Documentation
Subject to satisfactory underwriting, valuation and due diligence, formal loan documentation may be issued.
Borrowers should obtain appropriate independent legal advice and carefully review the terms, costs, obligations and risks before entering into any finance agreement.
5. Completion
Once all required documentation has been completed and all conditions precedent have been satisfied, the transaction may proceed to completion.
Funds are normally released through the relevant solicitors in accordance with the agreed completion arrangements.
Completion remains subject to all required approvals and legal requirements being satisfied.
What Can Affect the Speed of a Bridging Loan?
Property and Security
Straightforward properties with clear legal title may generally be easier to assess than properties involving complex ownership, planning issues, lease arrangements or substantial works.
Exit Strategy
A credible and clearly evidenced exit strategy is an important part of bridging finance underwriting.
Examples may include:
- sale of the security property;
- sale of another property;
- refinancing onto appropriate longer-term finance; or
- repayment following completion and sale of a development.
The viability of an exit strategy will be assessed as part of the overall transaction.
Borrower Information
Providing complete and accurate information at the beginning of the process can help avoid unnecessary delays.
Additional information may be required depending upon the borrower, property and proposed transaction.
Legal Complexity
Existing charges, restrictions, leasehold issues, unregistered title or other legal matters may affect completion times.
Valuation
Where a valuation is required, access to the property and the availability of an appropriate valuer may influence the timeline.
Loan Size and Structure
The size, loan-to-value, security structure and overall complexity of a transaction may affect underwriting and approval requirements.
How Can Borrowers Help Avoid Delays?
Borrowers can help the process by preparing relevant information early and responding promptly to requests from the lender, valuer and legal representatives.
It may also be beneficial to:
- have identification and supporting documentation available;
- provide accurate information about the property and proposed transaction;
- clearly explain and evidence the proposed exit strategy;
- ensure that valuers can obtain access to the property where required;
- instruct solicitors experienced in property and bridging finance; and
- understand the potential interest, fees, valuation costs and legal costs associated with the facility.
Actual requirements will depend upon the individual transaction.
Bridging Finance Compared With Conventional Property Finance
Bridging finance and conventional mortgages serve different purposes.
Bridging finance is generally intended to provide short-term funding for transactions where flexibility and timing may be particularly important.
Conventional mortgages are normally designed as longer-term finance and may involve different underwriting, affordability and documentation requirements.
Neither solution should automatically be considered more appropriate than the other. The appropriate funding structure depends upon the borrower’s objectives and individual circumstances.
Important Regulatory Considerations
The regulatory status of property-secured lending depends upon the specific circumstances of the transaction, including the identity of the borrower, the nature and use of the property being offered as security and the structure and purpose of the transaction.
Certain property-secured lending arrangements may constitute regulated mortgage contracts or otherwise fall within the scope of UK financial services regulation.
Ponte Finance PLC focuses on property finance for business and investment purposes and does not offer regulated residential mortgage advice.
Ponte Finance PLC is not authorised by the Financial Conduct Authority (FCA).
Prospective borrowers should obtain appropriate independent legal, tax and, where necessary, regulated financial advice regarding their individual circumstances.
Is Bridging Finance Right for Your Project?
Bridging finance can provide a flexible short-term funding solution for appropriate property transactions, but speed should not be considered in isolation.
Borrowers should carefully consider:
- the total cost of borrowing;
- the security being provided;
- the repayment obligations;
- the proposed exit strategy;
- the consequences if the exit strategy is delayed or unsuccessful; and
- whether the facility is appropriate for the intended transaction.
Every transaction is subject to underwriting, valuation where required, legal due diligence and final approval.
Discuss Your Property Finance Requirements
If you are an experienced property investor, developer or property professional seeking short-term property finance for business or investment purposes, speak with Ponte Finance about your proposed transaction.
Our team can review the initial details of your project and discuss whether it falls within Ponte Finance’s lending criteria.
Important Risk Warning
Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Ponte Finance PLC is not authorised by the Financial Conduct Authority (FCA).
This material is provided for general information only. It does not constitute financial, investment, legal or tax advice, or a recommendation to enter into any particular financial arrangement.
All applications are subject to eligibility, underwriting, satisfactory security, valuation where required, legal due diligence and final approval. Terms, availability and completion times vary according to individual circumstances.
Borrowers should obtain appropriate independent professional advice before entering into a secured finance transaction.