FAQs

Bridging Loan FAQs

Bridging finance is a form of short-term, alternative finance designed to provide property investors with flexible funding for their investments. Helping to bridge the gap between payments, bridging finance is often used by people or companies who want to:

Secure payment on an asset while long-term financial solutions are worked on in the background
Keep moving plans afloat by bridging the gap between sale and completion dates in a property chain
Plan speedy turnarounds for renovation projects
Buy property quickly via auctions

Generally, borrowers use some form of collateral as security, including real estate or stock inventory. While bridging finance is a short-term solution, term lengths can vary between lenders. At MFS, our funding is available from 3-24 months.

Bridging finance will need to be repaid in full at the end of the term. To do this, an exit strategy will need to be arranged.

We offer different types of bridging loans, depending on your circumstances and purpose of the loan.

Bridging finance can be issued very quickly in comparison to how banks and other long-term lenders move when dealing with a property purchase. Generally, bridging finance can be issued in mere days following an application.

For comparison, mortgage approvals can take between 30-45 days on average. In complex circumstances, this can even stretch into months.

Dealing with long-term mortgages can be stressful for buyers who need to move quickly. For example, auction buyers typically only have 28 days to complete their purchases.

The flexibility of bridging finance is another potential benefit for investors. When repaying loans, most companies offer serviced repayments, where the borrower pays monthly interest. They may also allow rolled up repayments where payments are delayed until the end of the term.

Many bridging lenders allow for a mixture of both, often being tweaked to fit the buyers specific needs and circumstances.

Bridging finance is typically used for residential or commercial property purposes. This can cover a broad range of investments and situations, including:

Buying property at auction
Purchasing a property while awaiting the sale of another
Expanding a property portfolio
Renovating a run-down property with a sale in mind
Making a commercial investment such as moving office or upgrading a warehouse

This is far from an exhaustive list. The benefits of bridging finance allows for flexible investment in almost any situation where short-term support is needed. It should be remembered however, no matter what the end goal is, a clear exit strategy will be needed.

When you apply for bridging finance, lenders will add a charge to the property being used as security. This will be needed to secure a loan against that property.

There are two types of charges for bridging finance:

First charge – this is where the loan is the first, or only, borrowed funds secured against a property. Long-term mortgages being an obvious example
Second charge – this is where a loan or mortgage is already listed against a property and a second charge loan is added against the property to raise additional finance

Where property with second charge finance is repossessed and is sold off to pay any outstanding debts, first charge loans will receive repayment in full first. Once this is done, a second charge lender would then receive their repayments from whatever remains of the sale. Given this order of repayment, second charge finance is riskier for bridging lenders. As such, they often have higher monthly rate charges when compared to first charge loans to reflect the risk.

While the bridging process will vary between lenders, MFS follows six simple steps:

A bridging finance enquiry is received
Indicative terms are issued quickly – within 4 hours. The terms are subject to credit approval and receive of information
Decision in principle (DIP) issued, subject to valuation, due diligence and legal terms
Valuations are instructed. Here, commitment fees are received, while solicitors are instructed
Legal paperwork issued and commitment fee refunded
The funds are then issued – also known as loan drawn down

MFS has a track record in providing quality specialised finance products and services. With over 15 years of experience behind us, we have highly qualified underwriting staff who specialise in complex circumstances. We’re adept at reacting quickly to any potential arising problems.

In dedicating ourselves to borrowers facing unique challenges, we make sure we do not stick to a tick-box criteria. We take the applicant, their property and financial circumstances into consideration when assessing them on their individual merits. As a result of this, we can provide finance to those with adverse credit, CCJs, complex company structures or undervalued properties.

Aside from flexibility, we pride ourselves on speed. You could have funds in your account in as little as three days, with enquires turned around into bridging loans within three to 10 days.

As we move through the process, we also won’t throw any curveballs your way. Your rate will not change at any point during your bridging term with MFS. We present all of our changes upfront – you can rest assured there are no hidden fees.

General FAQs

There are many benefits of bridging finance. Most notably, fast bridging loans can be delivered far quicker than mortgages – in days rather than weeks or months. This speed enables property investors to seize opportunities before competitors, which is particularly important in the case of buy-to-let bridging loans.

Auction bridging is very useful as it means people who buy a property at auction can pay for the asset within the short timeframes auction houses usually impose. Meanwhile, commercial bridging loans and bridging for refurbishment deliver capital to other areas of the real estate sector so a broad range of investors and developers can pursue opportunities on the market.

By using a bridging loan, an individual has the ability to raise more capital by securing the debt against any existing property assets in their portfolio. Furthermore, they benefit from the fact that they borrow against the value of the property, not the purchase price.

MFS is a specialist in fast bridging loans. We have more than a decade’s experience of working with brokers and private clients to deliver bespoke bridging loans for buying a property.

Our team of experienced underwriters deal with each bridge loan enquiry we receive on a case-by-case basis, which means we can provide the best possible bridging loan to our clients.

MFS provides auction bridging, bridging for refurbishment, bridging for buying a property, commercial bridging loans, buy-to-let bridging and much more.

You can use our bridging loan calculator to find out how fast bridging finance could work in your particular circumstances.

Bridging loans can be secured in just a matter of days. MFS specialises in fast bridging finance, with our experience and expertise enabling us to deliver a decision promptly. We also have immediate access to funds, which allows us to send the finances quickly to the borrower once the terms of the bridging loan have been agreed and our due diligence has been completed.

Every enquiry for a bridge loan must be assessed on its own merits, but speed is always of paramount importance.

Bridging loans can be used for the purchase and refurbishment of lots of different types of property. These are split between both commercial bridging and residential bridging.

Commercial bridging loans are used to purchase or renovate real estate that is used for business purposes. For example, commercial bridging loans can be issued for the acquisition of a shop, restaurant or warehouse, to name just a few potential uses.

Residential bridging, on the other hand, refers to bridging loans that are used to purchase houses and flats. Within this there are auction bridging loans and buy-to-let bridging loans, among many others.

A first charge loan and a second charge loan refer to the order of priority for two different sources of debt. For example, if someone has a first loan for the property they live in and then secures a second loan, they will always make repayments for that first loan before making repayments for the second – the first charge takes priority.

When it comes to bridging finance, it is easier to secure more money for a first charge loan as the lender knows they are the priority when it comes to recovering funds. Meanwhile, as a result, a second charge bridging loan will carry greater risk. Therefore, the rates between a first and second charge loans usually vary.

Know Your Customer – often referred to as KYC – is the process that businesses use to identify and analyse potential customers. It will involve due diligence from the business, such as a fast bridging loan provider, to help them assess the risks of working with a particular individual or organisation, as well as the intentions of the customer.

KYC is a vital part of a bridging lender’s due diligence process as it ensures money is only lent to suitable clients.

In order to process an application for a bridging loan, a lender will require some details of property (such as Residential, Semi-Commercial, Commercial) information. For example, a borrower will need to provide: personal details; whether it is a first or second charge loan; the value and length of the desired loan; details about the purpose of the bridging finance; and information about existing debts, assets and incomes.

Bridging finance is most often secured against a property asset – as such, information about the property being used as a security will need to be provided.

In other instances, bridging loans can occasionally be secured against other assets, such as cars, jewellery, antiques and artwork. In which case, detailed information about these assets must be made available with valuation.

Brokers have an important role to play in the finance sector, particularly for individuals or organisations seeking credit. Specifically, a professional broker can both educate a borrower about the different options available to them, as well as managing potential deals for them with certain lenders.

In the bridging loans industry, brokers act on behalf of a borrower to source loan options and competitive rates. At MFS we work with brokers/intermediaries and directly with private clients.

Having a solicitor is strongly recommended for any individual or organisation looking to secure a bridging loan.

As with any property purchase or significant financial transaction, having legal support is extremely important. Using solicitors who have a good understanding of the bridging finance industry can help ensure the transaction proceeds efficiently and that the borrower is fully aware of what is involved in this process.

When a bridging loan is secured, the borrower and the lender will agree an exit strategy, which will detail exactly how and when the loan is going to be repaid.

Usually, the bridging loan will be repaid, inclusive of the interest accrued, by an agreed date – typically following the sale of the borrower’s existing property asset. It is important, therefore, that the borrower factors in potential delays to the sale of an asset when agreeing the exit terms of the bridging loan.

It is also imperative that the borrower establishes whether the lender will charge if they wish to repay their bridge loan prior to the agreed exit date.

We lend to a wide range of applicants using our bespoke bridging loans from property investors to property developers or auction buyers. The product’s flexibility allows us to tailor our products to suit your individual financial needs. We’ve designed our bridging loan criteria around you – to allow for:

Flexibility
Reliability
Speed

This means we are ready to help with a wide range of financial situations or investments, without putting you through a lengthy and confusing process.

If you need finance quickly, our panel of solicitors and surveyors are always ready and will swiftly perform the property valuations, taking care of the legal process.

Our bridging loans are eligible for borrowers from a wide selection of property or financial backgrounds. Whilst bridging finance is a preferred choice for landlords, property developers and investors alike, we’re flexible. Looking at the bigger picture, we focus on all elements such as your financial situation, your property / properties as well as your individual application.

That’s why, unlike other lenders, our simple bridging loan application assesses every enquiry on a case-by-case basis at our underwriter’s discretion. We tailor your experience in a highly unique way, and make sure that we meet your bridging loan criteria, as well as our own.

Bridging Loan Applicant Criteria

Applicant
Individuals
Self employed
Limited
LLPs
SPVs
Offshore
Complex structures

Nationality

All UK
All EEA Nationals
All countries except sanctioned states

Location

England
Wales

Payment

Serviced monthly
Interest rolled up
A combination of both

We understand that everyone’s credit history is different and that you may be worried about if yours will affect your application. There are many cases where a standard loan will decline an applicant due to earlier circumstances. However, as specialists in the complex, we know that not every situation is the same and we work around the clock to find a solution that works for you.

Whereas traditional lending may use a limiting criteria, we asses applications case-by-case and work with you to tailor your loan specifically to suit your financial needs.

All our bridging clients will have a dedicated MFS underwriter assigned to their cases. They will be there to walk you through our simple 6 step process and be available to answer questions and update you on the loan process, at any time.

Our loan flexibility allows us to consider cases in scenarios usually dismissed by other lenders. Whether that be:

Meeting transaction deadlines
Broken chains
Missed mortgage
Released capital
Replacing existing finance
Non-renewal from existing lender
Business cash flow
Short-term working capital
Divorce settlements
Annulment of bankruptcy
Default
Transferring from individual to company
Tax, liabilities, IHT, CGT, VAT
Discharging adverse credit
Exiting IVAs
Repairing CCJs

MFS bridging loans cater to both individuals and businesses alike, including Limited, LLPs, SPVs, offshore companies.

Buy-to-let (BTL)

An investment mortgage on a property that the owner lets out to a 3^rd party in return for rental income. Typical 3^rd parties include a single person, a family, unrelated groups (e.g. students, several tenants each renting a room), a short term let like an AirBnB, or a corporate let where a company leases a flat for visiting staff or a local authority to let out to those requiring a home.

Most BTL mortgages are interest-only; meaning you pay monthly interest on the amount, however, this does mean that the capital borrowed at the start needs to be paid off at the end of the term either with the sale of the property, using savings to pay off the debt, taking a retention deal, or re-mortgaging with another lender.

There are a few fees you will need to be aware of when arranging a buy-to-let mortgage with MFS:

Admin Fee: £199 per property (max £995), payable when you want to proceed to a property valuation. This is free for existing MFS customers who currently have an active BTL mortgage or bridging loan.
Product Fee: from 1.5% of the loan amount. This is paid when the loan is redeemed at the end of the term.
External fees: Valuation & Solicitor fees. All properties need a valuation from a surveyor, and a solicitor needs to be involved to ensure all things are correct and ownerships recorded.

Regardless of your circumstances you can apply for a buy-to-let mortgage if you have at least 25% deposit. However, it’s important to find a mortgage provider that considers your specific needs.

Our product has three tiers to suit a range of borrowers: Download our Product Guide to find out more on these.

Alternatively, call our specialist buy-to-let team who are on hand to discuss your requirements and find the product which works best for you.

Our buy-to-let product does cater for clients with adverse credit, which means we can take the below issues into consideration when assessing the application:

Missed mortgage payments
Unsecured card/loan payments
County Court Judgments (CCJs) & Defaults
Bankruptcy / Individual Voluntary Arrangement (IVA) / Days receivables outstanding (DRO)

Our buy-to-let mortgages are interest only. However, we do offer deferral of up to 2% and/or roll-up of up to 9 months of payments in order to boost loan sizes and provide flexibility.

The deposit needed will depend on your loan-to-value. Our maximum loan-to-value is 75% (for our Solutions BTL & Specialist BTL) and 70% (for our bespoke level). This means the minimum deposit you will require will be 25% of your property’s value.

Of course. Whether you are looking to re-mortgage from a different provider, exit another finance solution such as a bridging loan, or apply for another BTL mortgage from MFS, we will assess your application and provide you the finance you need.

You can, however this will depend on your intended use for the property. Your finance provider may allow you to move to a ‘consent to let’ agreement, however some lenders require you to take out a new mortgage on the property to move it from a residential to a buy-to-let. You will also need to ensure your asset is compliant with your local council’s buy-to-let rules and regulations if you are changing the use of the property.

Not sure how to find these? You can check on the gov.uk website here.

Instant quote at your finger tips

From property renovation to development exit, you can use our calculator to receive a detailed quote regarding a potential bridge loan with MFS – so you know what to expect from the get-go.

Bridging Calculator

Working in the same dynamic as our bridging calculator, our buy-to-let calculator will help you find out how much you can borrow for the product that you need.

Buy-To-Let Calculator

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