BESPOKE BRIDGING LOAN

& SHORT TERM LENDER

AUCTION PURCHASE

& BRIDGE TO LET LOANS

KNOWLEDGE BASE

Another   very   common   use   of   bridging   loans   is   for   properties,   both   residential   and   commercial,   purchased   at   auctions.   When   a   property   is   successfully acquired at auction the investor is usually required to pay a deposit of circa 10% up front and the balance within 30 days. This   sort   of   time-period   can   be   far   too   short   for   arranging   a   more   traditional   mortgage   and   in   some   cases   the   properties   being   acquired   would,   in   any case,   be   un-mortgageable   in   their   current   condition.   Properties   needing   extensive   work   and   upgrading   are   often   more   likely   to   be   sold   at   auction   than on the private market. How exactly then do auction purchase loans work? Some   investors   like   the   certainty   of   an   offer   from   a   bridging   lender   before   they   attend   auction.   Having   researched   a   property   from   the   auction brochure/listings   experienced   investors   will   usually   decide   the   maximum   amount   they   are   prepared   to   bid   up   to   in-order   to   secure   the   property   in question   and,   less   their   own   cash   input,   seek   funding   up   to   this   amount.   In   this   situation   and   with   a   big   enough   cash   input   from   the   investor,   the bridging   lender   may   well   look   at   securing   against   just   the   auction   property.   Of   course,   in   the   competitive   world   of   the   auction   house   there   is   no guarantee   the   investors   maximum   bid   will   be   enough   but   at   least   the   investor   can   be   secure   in   the   knowledge   that,   up   to   the   pre-agreed   level,   he   has backing from a specialist lender. For   every   well-prepared   investor   there   is   perhaps   another   with   a   somewhat   more   relaxed   attitude   who   will   wait   until   after   they   have   secured   a property   at   auction   before   seeking   finance   within   the   30   day   window   before   full   payment   falls   due.   Having   usually   already   parted   with   a   non- refundable   10%   deposit   this   can   be   seen   as   a   slightly   high-risk   strategy   but,   in   the   event   that   it   is   needed,   investors   of   this   type   often   have   other properties   within   their   portfolio   that   can   be   used   as   collateral   against   the   new   property   being   purchased.   They   may   still   get   an   offer   based   upon   the property they have successfully bid against but the offer of other/additional security can be important if timescales are particularly challenging. It   is   not   entirely   uncommon   for   the   offer   of   more   traditional   funding   to   be   revoked   during   the   30   day   window   after   acquisition   leaving   the   investor with   a   very   real   risk   of   losing   their   deposit.   This   is   where   bridging   lenders   really   come   into   their   own   often   providing   the   required   funding   within   7 days of being approached, sometimes less. A   significant   proportion   of   properties   bought   at   auction   are   acquired   by   landlords   with   a   view   to   subsequent   letting.   For   these   deals   a   bridging   term of   circa   9-12   months   is   typically   the   loan   term   an   investor   will   seek.   Such   a   period   will   allow   the   investor/landlord   to   either   refurbish   or   carry   out   more significant   renovation   to   maximise   the   rental   value   of   the   property   in   question.   Once   works   are   completed   the   they   will   then   seek   to   get   the   property let.   A   refurbished/renovated   property   with   tenants   already   in   place   on   formal   assured   short-hold   tenancy   agreements   makes   the   property   a   very attractive   form   of   security   for   a   specialist   long   term   Buy   to   Let   mortgage   lender.   Such   a   lender   can   then   redeem   the   bridging   loan   specialist   offering   a long-term deal at a lower annual cost to the investor. Thus,   the   Auction   Purchase   loan   is   ideal   for   ‘bridging   the   gap’   until   longer   term   funding   can   be   secured   but   of   course,   upon   completion   of   works,   an investor   may   simply   seek   to   sell   the   property   rather   than   retain   it   in   a   portfolio.   In   this   instance   the   sale   will   provide   the   exit   for   the   bridging   lender   as opposed to a refinance. Finally,   with   many   short-term   loans,   interest   is   front   loaded   and   built   into   the   loan   meaning   that   they   do   not   have   to   be   serviced   monthly.   This   can   be very   useful   tool   for   investors   allowing   them   to   fully   focus   their   resources   on   getting   the   property   into   the   best   possible   condition   for   the   bridge   loan to be redeemed, whether this be by refinancing or sale. With   the   many   advantages   detailed   above   it’s   little   wonder   that   Auction   Purchase   loans   from   specialist   bridging   lenders   are   such   a   commonly   used tool by investors/landlords. Still unsure and need to explore your options? Why not consult an expert? Central   Bridging   are   bridging   loan   specialists   with   a   great   track   record.   We   are   a   principal   lender   offering   a   range   of   loan   facilities   for   business   use from £250K to £2.5M over periods from 3 to 24 months. Our loans are secured on freehold property across England and Wales. Crucially   you   will   always   speak   to   a   decision   maker   who   will   take   time   to   understand   you   and   your   situation   and   unlike   some   of   the   bigger   banks   will then tailor a solution that best suits your needs rather than their own. For a confidential discussion in the first instance contact us on:   Tel 03332 400 506   Email enquiry@centralbridging.co.uk Online
Central Bridging, Granary Wharf, Wharf Road, Burton on Trent, Staffordshire, DE14 1DU Tel: 03332 400 506   Email: enquiry@centralbridging.co.uk   Web: www.centralbridging.co.uk Central Bridging is a trading style of Central Bridging Loans Ltd. Registered in England & Wales | Company Registration Number 07728274. Central Bridging is not regulated by the Financial Conduct Authority (FCA). All loans arranged by Central Bridging are non regulated contracts as defined under The Financial Services and Markets (Regulated Activities) Order 2001 and the Financial Service and Markets Mortgage Credit Directive Order 2015. © Copyright Central Bridging Loans Limited Privacy Policy
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BESPOKE BRIDGING LOAN

& SHORT TERM LENDER

Another   very   common   use   of   bridging   loans   is   for   properties,   both residential   and   commercial,   purchased   at   auctions.   When   a   property is   successfully   acquired   at   auction   the   investor   is   usually   required   to pay a deposit of circa 10% up front and the balance within 30 days. This   sort   of   time-period   can   be   far   too   short   for   arranging   a   more traditional   mortgage   and   in   some   cases   the   properties   being   acquired would,   in   any   case,   be   un-mortgageable   in   their   current   condition. Properties    needing    extensive    work    and    upgrading    are    often    more likely   to   be   sold   at   auction   than   on   the   private   market.   How   exactly then do auction purchase loans work? Some   investors   like   the   certainty   of   an   offer   from   a   bridging   lender before   they   attend   auction.   Having   researched   a   property   from   the auction   brochure/listings   experienced   investors   will   usually   decide   the maximum   amount   they   are   prepared   to   bid   up   to   in-order   to   secure the   property   in   question   and,   less   their   own   cash   input,   seek   funding up   to   this   amount.   In   this   situation   and   with   a   big   enough   cash   input from    the    investor,    the    bridging    lender    may    well    look    at    securing against   just   the   auction   property.   Of   course,   in   the   competitive   world of   the   auction   house   there   is   no   guarantee   the   investors   maximum bid    will    be    enough    but    at    least    the    investor    can    be    secure    in    the knowledge   that,   up   to   the   pre-agreed   level,   he   has   backing   from   a specialist lender. For    every    well-prepared    investor    there    is    perhaps    another    with    a somewhat   more   relaxed   attitude   who   will   wait   until   after   they   have secured   a   property   at   auction   before   seeking   finance   within   the   30 day    window    before    full    payment    falls    due.    Having    usually    already parted    with    a    non-refundable    10%    deposit    this    can    be    seen    as    a slightly   high-risk   strategy   but,   in   the   event   that   it   is   needed,   investors of   this   type   often   have   other   properties   within   their   portfolio   that   can be   used   as   collateral   against   the   new   property   being   purchased.   They may   still   get   an   offer   based   upon   the   property   they   have   successfully bid   against   but   the   offer   of   other/additional   security   can   be   important if timescales are particularly challenging. It   is   not   entirely   uncommon   for   the   offer   of   more   traditional   funding to   be   revoked   during   the   30   day   window   after   acquisition   leaving   the investor   with   a   very   real   risk   of   losing   their   deposit.   This   is   where bridging    lenders    really    come    into    their    own    often    providing    the required funding within 7 days of being approached, sometimes less. A   significant   proportion   of   properties   bought   at   auction   are   acquired by    landlords    with    a    view    to    subsequent    letting.    For    these    deals    a bridging    term    of    circa    9-12    months    is    typically    the    loan    term    an investor   will   seek.   Such   a   period   will   allow   the   investor/landlord   to either   refurbish   or   carry   out   more   significant   renovation   to   maximise the    rental    value    of    the    property    in    question.    Once    works    are completed     the     they     will     then     seek     to     get     the     property     let.     A refurbished/renovated    property    with    tenants    already    in    place    on formal   assured   short-hold   tenancy   agreements   makes   the   property   a very   attractive   form   of   security   for   a   specialist   long   term   Buy   to   Let mortgage   lender.   Such   a   lender   can   then   redeem   the   bridging   loan specialist    offering    a    long-term    deal    at    a    lower    annual    cost    to    the investor. Thus,   the   Auction   Purchase   loan   is   ideal   for   ‘bridging   the   gap’   until longer   term   funding   can   be   secured   but   of   course,   upon   completion of   works,   an   investor   may   simply   seek   to   sell   the   property   rather   than retain   it   in   a   portfolio.   In   this   instance   the   sale   will   provide   the   exit   for the bridging lender as opposed to a refinance. Finally,   with   many   short-term   loans,   interest   is   front   loaded   and   built into   the   loan   meaning   that   they   do   not   have   to   be   serviced   monthly. This   can   be   very   useful   tool   for   investors   allowing   them   to   fully   focus their    resources    on    getting    the    property    into    the    best    possible condition   for   the   bridge   loan   to   be   redeemed,   whether   this   be   by refinancing or sale. With    the    many    advantages    detailed    above    it’s    little    wonder    that Auction   Purchase   loans   from   specialist   bridging   lenders   are   such   a commonly used tool by investors/landlords. Still   unsure   and   need   to   explore   your   options?   Why   not   consult   an expert? Central   Bridging   are   bridging   loan   specialists   with   a   great   track   record. We    are    a    principal    lender    offering    a    range    of    loan    facilities    for business   use   from   £250K   to   £2.5M   over   periods   from   3   to   24   months. Our    loans    are    secured    on    freehold    property    across    England    and Wales. Crucially   you   will   always   speak   to   a   decision   maker   who   will   take   time to   understand   you   and   your   situation   and   unlike   some   of   the   bigger banks   will   then   tailor   a   solution   that   best   suits   your   needs   rather   than their own. For a confidential discussion in the first instance contact us on:   Tel 03332 400 506   Email enquiry@centralbridging.co.uk Online
Central Bridging, Granary Wharf, Wharf Road, Burton on Trent, Staffordshire, DE14 1DU Tel: 03332 400 506  Email: enquiry@centralbridging.co.uk Web: www.centralbridging.co.uk Central Bridging is a trading style of Central Bridging Loans Ltd. Registered in England & Wales | Company Registration Number 07728274. Central Bridging is not regulated by the Financial Conduct Authority (FCA). All loans arranged by Central Bridging are non regulated contracts as defined under The Financial Services and Markets (Regulated Activities) Order 2001 and the Financial Service and Markets Mortgage Credit Directive Order 2015. © Copyright Central Bridging Loans Limited Privacy Policy
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AUCTION PURCHASE

& BRIDGE TO LET

LOANS

KNOWLEDGE BASE

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