Compare bridging loans for property development
Finance to help you start or finish a property development
Compare property development finance
What is a bridging loan for property development?
Bridging finance for property development is a relatively quick way to get hold of cash to finance a development project.
But while it's less complicated than securing a traditional mortgage or remortgage, it's also shorter term and more expensive per month.
Bridging loans typically start from around £5,000 and there's no official upper limit to what you can borrow, as long as you have assets to secure the loan against. But the terms generally range from a few weeks to a year.
But the terms are generally not much longer than two years.
What can you use them for?
Bridging loans can be used for a range of purposes.
For example, you might get a loan if:
You're looking to buy a property at auction
You see an investment opportunity and want to move quickly
You have some land to build on but not the cash to start a development
You need cash to complete a development
Loans can be used for residential properties as well as commercial and mixed use properties.
Property development loans tend to come with expensive fees on top of interest. So, check exactly what the costs are before you proceed.”
How to get the right bridging loan for property development
Property development bridging loans can get you the funds you need to finance your construction projects. Here's what you need to know:
How much you’re allowed to borrow
The loan-to-value percentage
How long you need to pay it back
What does property development finance cost?
Usually, a bridging loan will be priced monthly rather than annually because most people take them out for short periods of time.
Generally, the loans are quite expensive. For example, the average monthly interest rate is 0.84%, which is equivalent to around 10% a year.
On top of that, you’ll have to pay an arrangement fee when you take out the loan, which is usually charged at around 1% to 2%.
The equivalent annual percentage rate of a property development bridging loan is 6-24%, much higher than you would usually pay for a residential mortgage.
Make sure you look at all the fees as well as the charges before taking out a loan.
Typical costs to consider include:
Arrangement fees - This is the cost of setting up your loan and is normally a percentage of the amount you borrow, but can also be a fixed cash fee. Most lenders charge between 1-2%, but some are even higher.
Broker fees - If you use a broker to find your bridging loan, you normally have to pay a fee. This could be hundreds or sometimes thousands of pounds but could be worthwhile if they can find you a cheaper provider.
Exit fees - This is the cost of paying back your loan early. Not all lenders charge exit fees, but those that do typically cost around 1% to 2% of your loan amount.
There may be other fees to pay, so always check the total cost before you proceed.
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