The bridging loan market is continually growing and evolving, offering proven solutions for overcoming short-term funding gaps in all types of UK property transactions.
Property developers and investors are increasingly using bridging loans because they’re fast, flexible and can significantly improve access to market opportunities.
In this article, we’ll take a look at using bridging loans in property development and how using Brickflow can help you ensure you’ve got a winning deal before securing the best property development bridging loan on the market.
Bridging loans are short-term loans that can be used for various circumstances and property transactions, including property development.
They are secured against assets, either the property being funded by the loan, or additional collateral, most typically other property.
Bridging loan lenders assess and approve applications primarily on the basis of the exit strategy. In the case of a property development bridging loan, this would typically be:
Bridging loans usually have terms of up to 24 months, and lenders typically offer a degree of flexibility with repayment: an open-ended bridging loan allows the borrower to repay the loan at any point within the agreed maximum term. Likewise, early repayment is possible without incurring charges after a minimum term has passed.
There are many property deals where a developer might use a bridging loan, including opportunities to increase profits or capitalise on market opportunities.
Some typical examples of when a bridging loan might be used by a property developer:
There are also some property transactions that traditional financing can’t meet where a bridging loan can be used:
Some of the key types of bridging loan types used in property development include:
Using bridging finance for property development works in the same way as any other bridging loan:
At Brickflow, we’ve streamlined the search and application process into a single digital journey, saving you hours of time applying to individual lenders, several of which might not be able to meet your requirements anyway.
Read our guide to find out more about bridging loan eligibility requirements.
Below we take a look at common costs associated with property development bridging loans.
Interest is typically calculated daily, so you only pay interest on the duration of your loan, even if you exit the loan early or midway through a month (some lenders charge monthly, meaning you pay a full month’s interest regardless of when you exit). Most lenders offer rolled-up interest (paid at the end of the loan), so there are no monthly payments involved.
Your final redemption payment (to pay off the loan) will include the original amount of capital borrowed plus accrued interest.
Yes, whilst bridging finance can suit a variety of property development projects, depending on the circumstances, there are other finance options that might be more appropriate.
Specifically designed for large-scale property development projects, including ground-up construction of commercial or residential properties, property conversion and heavy refurbishment work. It is bespoke and tailored specifically to each project, with funding released in stages to align with the build schedule.
You can potentially borrow more with a development finance loan compared to a bridging loan, however, the application process is more complex and timeframes for loan completion are longer.
If you think development finance might be more appropriate, run your project numbers through Brickflow’s development finance comparison, the only tool on the market to search & compare live development finance loans. It’s the quickest, most accurate way to make sure your deal stacks against actual finance costs and carry out comprehensive due diligence on your project before committing to a site.
A long-term solution for purchasing commercial properties. They can be arranged on a capital & interest repayment basis or interest only. Where a commercial property has built up equity, you can refinance onto a new commercial mortgage and release some of the capital for development work.
You can instantly compare commercial mortgages on Brickflow.
Joint ventures typically involve an investor providing the funding for a developer’s project in return for a profit share – usually 50%. It can work when your capital is tied up, but you don’t want to miss out on an opportunity that has arisen.
Second-charge loans – including mezzanine finance, investor, or equity finance – are typically arranged in addition to senior debt (development finance) and can provide further working capital for property development.
If you are unsure as to what type of finance is right for your project, speak to a specialist finance intermediary. We are happy to connect you with any of our broker partners who are amongst the best in the UK and can help you secure the best loan for your circumstances.
Find out more about development finance brokers and bridging finance brokers.
Before committing to a property development project, you need to know how much you can borrow and how much it will cost.
It’s easy to underestimate your finance costs, overestimate your profit, and consequently overpay for the property, which can be the difference between a failed or successful project.
Running your project numbers though Brickflow's live bridging loan comparison tool is the easiest, most accurate way to check your deal stacks and secure the best bridging loan for property development. With instant loan results, you can adjust and play around with your figures if needed or save your project and come back to it later, before applying directly from the platform.
Here's how it works:
1. ENTER your project criteria and model your deals
Try our bridging comparison tool today to find the best bridging loan for property development.
Using bridging finance for property development can create opportunities, help you maximise profit and ultimately scale your business sooner.
There are many fast and flexible bridging loans for property development. With the right due diligence to ensure your project is viable, you can find the right type of bridging finance. Run your project numbers through Brickflow’s bridging comparison tool today to find out what you could borrow and compare loans available for your project.
Do I need to provide security against my property development bridging loan?
Yes, all bridging loans are secured. Typically the security is the property you’re purchasing with the bridging loan, but it can be secured against other property and assets.
You are at risk of losing any assets used as security if you can’t repay the loan.
Some lenders in some circumstances might accept additional security instead of a cash deposit, but this is assessed on a case by case basis.
You can also potentially secure 100% bridging finance in a joint venture with an investor, in return for a profit share - typically 50%.
Yes, it’s possible to secure a bridging loan for renovations in your own home, but you would have to demonstrate a viable exit strategy to the loan. For example, even after extensive renovations, properties have a limited value, so the amount you borrow would have to be proportional to how much you can refinance your house for in order to exit the loan.
When a bridging loan is used for the borrower's own home, it is regulated by the FCA (Financial Conduct Authority) and subject to the same regulatory criteria as a conventional mortgage. Therefore, completion times are much longer than unregulated bridging loans.
Lenders on the Brickflow platform offer bridging loans from as little as £25,000.
However, they are far more likely to engage with borrowers looking for £150,000 plus. This is simply because for the same time and resource, they would earn, in this example, 6 times more.