Development Finance and Bridging Loans

Are you starting a new development project? Maybe you’re thinking about building your very own dream home from scratch?

At Windsor Hill Mortgages, we have relationships with some of the most reliable development finance brokers across the market, making it easier for you to gain access to funds allowing your project to get started without delay.

We can also advise on bridging loans when this is a more suitable form of finance for your circumstances.

 

Speak to one of our team for a free no obligation consultation to see what services we could offer you.

 

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Which type do I need?

What is a Bridging Loan?

Bridging loans are traditionally used to borrow funds on a short-term basis, typically around 12 months.  As the name suggests, these loans are usually for 'bridging' the financial gap between the sale of your current home and the purchase of your new one.

What is Development Finance?

Development finance is another short-term loan option, granted for development or refurbishment of an uninhabitable property. This type of loan is usually used by experienced developers in order to raise funds for their next project.

Why use Bridging Finance?

1. Renovating your home

Bridging finance could cover the cost of a renovation until you are able to get a remortgage based on the increased value of your home.

2. Property chain fixing

In a broken property chain a bridging loan can enable you to proceed with the purchase of your new home even if the sale of your current home has fallen through.

3. Purchasing a property at auction

The process of getting a mortgage may be too slow or unsuitable for an auction property so the loan could secure the property until a mortgage can be applied for.

 

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Types of Bridging Loans

There are a number of different types of bridging loans available, speak to one of our qualified advisors to find out the one that could work best for you. It is important to remember that bridging loans regularly have higher interest rates than other types of financing.

Variable Rates

Variable rate bridging loans mean that the interest rates can potentially follow the Bank of England’s base rate which can change as frequently as every 6 weeks.

Open Bridge Loans

Open-bridge loans have no set date for settling the loan, this is useful for buyers who want to purchase a new home but haven’t sold their existing one yet.

Fixed Rates

With fixed rates it means that the interest rate won’t change throughout the loan period meaning that the monthly repayments will stay the same.

Closed Bridge Loans

Closed-bridge loans are for when a date has been fixed for the loan to be fully repaid by. This could be used for someone that is selling a property and waiting to receive payment to repay the bridging loan.

Why use Development Finance?

Development finance is funding used for developing or refurbishing an uninhabitable property or constructing one from the ground up, in which development finance can be used for both the land purchase and building costs. Speak to one of our team if any of the below are applicable to you.

  1. You are thinking about getting planning permission on a plot of land that you own
  2. You own a plot of land with planning permission and want to build on it
  3. You have seen land for sale and are thinking about a development opportunity
  4. You have seen or bought a derelict property that you would like to demolish and rebuild
  5. You have seen or bought a derelict property that you would like to save and renovate

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Development Finance Rates

Interest rates for development finance will vary depending on the lender. We have access to some of the best development finance brokers across the market.

There are a number of criteria that development finance lenders will take into consideration when agreeing a rate for the development project. These can include: developer experience, loan amount, project location, estimated finished project value.

Bridging Loan and Development Finance FAQs

Bridging Loan FAQs

What are the benefits of bridging loans?

Bridging loans can be arranged very quickly meaning that if a borrower requires fast access to funding then bridging loans can be a viable option.

You can repay bridging loans back early without any penalties and this can usually save you money on interest.

These loans allow borrowing against properties that are not suitable for a mortgage.

What are the alternatives to bridging loans?

One alternative could be to get a mortgage on the second property, this would mean a loan with a longer term but it could work out less expensive.

Unsecured personal loans may be another option, you can borrow amounts up to £50,000 so may be more suitable to bridge a smaller amount. These loans also tend to have annual interest rates meaning it could be less expensive. We do not provide advice on unsecured personal loans.

What are the risks?

If you are using the loan to purchase a new house before you find a seller for your current home then you risk having two properties to pay for.

As bridging loans are designed to be short -term high value borrowing, lenders often expect high returns meaning that interest rates can be high and missing a repayment can incur large fees.

As lenders will have secured the debt against the property there is the risk of losing the property if you cannot afford the repayments.

Can I get a bridging loan if I have bad credit?

Yes, even with bad credit there is the chance that you are able to get accepted for a bridging loan. Speak to one of our advisors who will be able to talk you through your options. Taking out a bridging loan and ensuring each repayment is met can even help to improve your credit score.

 

Development Finance FAQs

How much can I borrow?

Lenders will have their own minimum and maximum available amounts, these can range from tens of thousands to millions of pounds.

What type of developments can I borrow on?

You can get development finance on a range of projects including: new builds, refurbishments, residential and commercial.

Can first time developers get development finance?

Yes, there are lenders who will lend to first time developers. However, there is a number of checks and documents required to see if you eligible.

Please note:

For development finance we act as introducers only.

The FCA does not regulate development finance and some forms of bridging finance.