View more on these topics

Myth-buster: Common misconceptions about bridging finance corrected

LendInvest has been a specialist bridging lender since 2008 at the heart of a sector that has become increasingly competitive and professional over the years. Despite a surge in media coverage, a few stubborn myths about bridging finance linger. Here are the most common misconceptions. Once unpicked they reveal bridging finance to be a useful short-term financing option for everyday funding challenges faced by property entrepreneurs, developers, landlords and people taking on one-off property projects.

Bridging finance is a loan of last resort or an afterthought

Bridging finance is still perceived by some as borrowing of last resort. In fact, bridging is commonly used as a smart solution to a range of everyday property market challenges.

Lenders view each application on its own merits, rather than trying to fit it into a rigid tickbox structure, which can make it a better solution in many cases.

Bridging finance is too expensive

The bridging sector has become increasingly competitive and the costs for standard ‘vanilla’ bridging loans have tumbled in recent years.

In addition the nature of bridging finance is short-term and its aim to overcome a temporary financial need until a more permanent solution is found. Though rates are often higher than conventional loans their short-term nature means they are frequently used to maximise profit, saving money.

Bridging finance is the Wild West of property loans

There are still some lingering perceptions of bridging lenders as “cowboys”: misconceptions which are entirely out of synch with the bridging sector today. As the bridging sector has become more competitive, this has not only had an impact on price but also on customer service and lending standards, each lender seeking to be the best. It has given way to a professionalised sector with high underwriting standards in place so that loans are made responsibly with the intention that they are repaid via a considered and viable exit strategy.

Repayment can come from a variety of sources. These include the sale of property, long-term refinance, sale of other assets or maturity of an investment.

In fact, bridging lenders today are less like cowboys and more like tailors, with skilled underwriters who are able to assess a case and provide a custom-made solution, rather than a “one size fits all” attitude.

Bridging is only useful for property purchases

The reality is bridging finance can be used for a range of opportunities which require immediate funding: a temporary cash flow problem in a cyclical business or a wish to delay a property sale; or until refurbishment has been completed.

Bridging can provide the time to achieve the best possible result for the customer. See more use examples below:

  • Development funding
  • Major refurbishment of property
  • Auction purchase
  • Paying a tax bill
  • Purchasing property under value
  • When you need to complete the purchase of a new property before completing the sale of another property
  • When you need to complete the purchase of a commercial property and the leases are not fully in place
  • Business turnarounds – where the business being acquired is not being managed properly
  • As a revolving credit facility
  • Where you have excellent rates with your existing lender, but your lender will not allow you to increase your existing loan on a short-term basis, without changing your overall terms
  • Raising money against your main residence for business purposes
  • Being threatened with repossession by your current lender, so replacing with a bridge loan will buy you time to sell an asset.



CML denies MPs’ claims it blocks longer rental tenancies

The Council of Mortgage Lenders has denied MPs’ claims that it is a “stumbling block” to longer tenancies in the private rented sector. In a House of Commons debate in December on reducing homelessness, Conservative MP and former property lawyer Will Quince said the CML played a part in blocking tenancies of more than one […]

Editor’s Note: What are you waiting for?

More good news rolled in last week to confirm that our optimism at the start of the year was not misplaced. Hot on the heels of Santander’s change of heart over retention proc fees came Coventry Building Society and TSB, both with a pledge to start paying such fees before the year was out. The […]

What are the headwinds facing the market in 2017?

After last year’s political and economic upheavals, will anyone listen to the experts’ predictions for 2017 and can the market withstand any more stormy weather? Predicting the trends that will shape the UK mortgage market tends to be more of an art than a science, particularly in the wake of 2016, a year that confounded […]


Landlords and tenants moving away from London market

The central London rental market is showing signs of a slowdown as tenant demand dips and landlords look to higher yielding investments in other UK cities. New research shows that the number landlords in central London who reported a rise in tenant demand over the past quarter has slipped almost 30 percentage points when compared […]

Top seaside property hotspots revealed

Like to let beside the seaside? The latest research from LendInvest looks specifically at coastal towns to find which areas offer the top average rental yields to landlords. Where are the top seaside postcodes for landlords? The interactive map below looks at the highest rental yields along the UK coast. According to the data, Hull, […]


News and expert analysis straight to your inbox

Sign up

Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now