Property Development
& Bridging Loans
What is a property development and bridging loan?
Property development and bridging loans are short-term funding solutions designed to help you move quickly when opportunities arise.
Bridging loans
Used effectively when purchasing either from auction or with properties which require refurbishment, which isn’t structural. Bridging loans can be offered in one of the following two forms:
- Retained interest loan – this has no monthly repayments with the interest deducted from the loan amount on day one, then repaid in full on or before the agreed term date, or a
- Serviced interest loan – interest is paid monthly, the day one loan amount will be higher, and interest saved when settled is calculated depending on the term remaining x the monthly payment
The costs of your refurb can also be included into the agreement, subject to approval and within the lenders criteria.
These products are built for speed and flexibility. They are not designed to sit in place for decades. They are there to create time, get moving with the opportunity in front of you and allow you to execute your plan.
The benefits?
Bridging finance provides speed.
Development finance provides structure for staged projects, aligned to build progress which helps to manage risk for all parties involved.
While rates can be higher than long-term mortgages, the value often lies in the property or the uplift value you’ll be creating when you complete the project.
Terms can range from 3 months – 36 months.
Why do businesses and investors use this type of funding?
Property transactions rarely wait.
- You may:
- Be looking to purchase within a strict deadline
- Need to act quickly
- Be refurbishing a property before refinancing it onto a commercial mortgage
- Need short-term capital while a sale completes elsewhere
- Be converting a residential property into multi-unit accommodation
In all of these situations, traditional mortgages can simply be too slow or too rigid.
What can I fund using these types of finance?
- Property development finance and bridging finance can be used for:
- Residential purchases
- Commercial property
- Mixed-use buildings
- Land acquisition
- Renovation and refurbishment projects
- Auction purchases
- Below market value acquisitions
- Ground-up developments
Funding can be arranged as a first charge or second charge depending on your existing borrowing and equity position.
First Charge
This means that the lender has the first legal claim over the property. Why does this matter? In the case that the borrower defaults, it will lead to the property being sold to repay the lender.
Second charge
This means that there is usually a mortgage already in place. The second charge provides additional borrowing on the property and sits behind the first charge lender, who would be paid first, it therefore incurs higher rates based on the higher risk.
What do lenders look for?
- Lenders will assess several key factors:
- The property itself, including current value and projected value after works
- Your deposit or available equity
- Your experience can strengthen an application, particularly for larger development projects, and
- Most importantly, lenders will require a clear and realistic exit strategy.
An exit strategy might involve selling the property, refinancing onto a commercial mortgage, or repaying from another confirmed source of funds.
A clear and realistic exit strategy is essential for both bridging and development finance.
Why Meridan Finance?
In short-term property funding, speed and presentation is everything.
Knowing which lenders move quickly, what information they require upfront, and how to structure the deal properly can make a significant difference to approval timelines.
Property development and bridging loans are designed to help you build, convert and create value. Laying the right foundations when it comes to your finance is critical to the speed and success of your project.
If you are ready to secure the right funding, talk to us now.