Published by The Finance Place · Updated · General information
What is the short-term problem?
Examples include an auction completion, a purchase before another property sells or a property that needs work before longer-term finance is possible. Match the facility to the actual purchase and works. A bridge secured on a property is not automatically a facility that funds staged construction costs.
Gross loan versus spendable cash
A £280,000 gross facility may release substantially less once fees and retained interest are deducted. With a 2% arrangement fee and 12 months of retained interest at an illustrative 0.8% a month, only £247,520 is released before other costs. If completion needs £260,000, the headline loan does not fill the gap.
Check the net advance against your completion requirement →Retained, rolled-up and serviced interest
Retained interest is held back at the start. Rolled-up interest is added to the debt; whether it compounds and on what basis depends on the agreement. Serviced interest is paid as you go. Compare net advance and exit balance together. Ask about minimum interest, unused-interest rebates, extension charges and the actual fee basis, rather than multiplying a headline monthly rate and treating that as the whole cost.
A refinancing exit needs evidence
If repayment depends on a mortgage, test the future property condition, value, rent or income evidence and the anticipated lender criteria. If repayment depends on sale, allow for marketing time, price reductions and sale costs. An optimistic valuation is not a committed refinance. Have a realistic contingency for the exit taking longer or raising less.
Bridging versus development finance
Light works funded from your own cash can be different from structural conversion or ground-up construction with staged lending. Planning, contractor arrangements, monitoring, cost overruns and future drawdowns can change the appropriate structure. Explain the whole scope of work; do not describe a structural project as cosmetic to fit a faster product.
Understand staged development funding →Check regulation, charges and downside before exchange
Occupation of the security, borrower type and use of funds can affect the regulatory position. Get advice about the actual arrangement, particularly where your home is involved. If the exit fails, a lender can enforce security. A three-month delay can add interest, extension fees or default charges while a sale price is falling. Do not rely on an extension being available.