Because property law is somewhat different to elsewhere in the UK, it can be difficult to obtain bridging loans in Scotland. This is the case, especially when approaching a traditional high street lender.
Bridging loans in Scotland by their nature are not a long-term solution. They are exactly as their name describes them – a short-term bridge to cover a shortfall when the mainstream funding for a transaction is not available for any of several reasons.
Typically, they are sought and offered to stem a cash flow issue that has arisen once a transaction has commenced. The transaction cannot be concluded because of an obstructive situation. Quite literally, they provide emergency funding while the clock is ticking.
That said, there are some, mostly private, lenders that provide access to bridging loans.
Bridging Loan Rates In Scotland
Bridging rates for loans secured against Scottish property have dropped significantly over recent years. This is due to an influx of lenders in the sector now lending in Scotland. Rates are available from 0.48% per month for regular bridging loans in Scotland and much lower from private banks, for high net worth individuals (HNWI) that qualify. Loan to values are generally up to 75% of value.
Scotland is also known for Below Market Value (BMV) bridging transactions, Belgravia Property Finance has successfully arranged 100% funding towards below market value purchases in Scotland. An example of a BMV deal is the client purchases a property on the open market value, the property has already had a valuation carried out (Home Report in Scotland), this values the property at £100,000, the property is marketed at this level but doesn’t sell, but the client negotiates a price of £70,000, this is now a below market value transaction.
Belgravia Property Finance can arrange a loan for the full purchase price, plus fees up to 75% of the value ie. a maximum loan of £75,000 in this case. Belgravia can then arrange exit finance via a mortgage. Rates for 100% loans which are below market value are higher than standard bridging rates due to the higher risk taken by the lender.
The Loans Are Unique
What makes a bridging loan unique is that it is a flexible product that is usually structured on bespoke terms that are unique to the specific lender, borrower, and circumstance under which the loan is being taken.
The loan will also be an interest-only loan because it is simply to cover other funding which, once available, will be repaid on the terms set by a different lender.
Bridging loans in Scotland are designed to provide access to funding secured against property, therefore, they can also be structured in different ways to include the security. Funding can be procured on either first or second charges or both. It is even possible to structure a loan across multiple properties.
Furthermore, any type of property can be considered for a loan and almost any borrower circumstance will be considered by the lender.
Newcomers To The Market
The financial crash that caused the credit crunch worked as a catalyst to bring about new innovative bridging products. Moreso, and especially in Scotland, new entrants to the market have forced change and a rethink of how the bridging loan market in Scotland is developing. Lower interest rates have also been seen in more recent years.
There are still far fewer lenders that will provide bridging loans in Scotland, compared to England, but the lending scene has improved substantially. Belgravia Property Finance has access to bridging loans that are unique and can connect you with different opportunities in private funding. There are even funders that will cover bridging loans in Scotland as well as England, Wales, the Channel Islands, and much of Europe.
Differences in Scottish property law have made it difficult for bridging lenders to provide loans across the UK. The few that do are specialists and are often accessible only through a specialist advisor.
What Are Bridging Loans In Scotland For?
Bridging loans are typically provided for:
- Scottish commercial properties
- Landlords that are building property portfolios both in England and in Scotland.
Applications for a bridging loan in Scotland will not follow the same procedure as applying for a high street mortgage. Using an expert broker means that you will find that the confidentiality and sensitivity are increased.
The level of professional conduct provided and expected is also much higher. Applications are processed quickly because bridging situations often accompany a sense of urgency. There are situations that without a rapid solution, transactions may in fact collapse. Something we would seek to avoid for our clients at all costs.
The typical bridging loan covers around 70% of the value of the property against which it has been secured. There are unusual situations, however, when the loan will cover 100% of the value of the property. This is the one similarity that can be seen with high street lenders.
Deals can take as little as a few days to finalise. They can, however, be expected to take between seven and fourteen days.
How Bridging Loans Work
Most bridging loans come in one of two forms.
Firstly, there is the closed bridging loan. This kind of loan is aimed at borrowers that have already completed an exchange on the sale of a property. They do, however, need the finance to secure the transaction. This type of bridging loan is easier to find and negotiate because risk to the lender will be reduced.
In the second instance, the bridging loan is known as an open bridging loan. These are provided in situations where a borrower has found a property that they wish to purchase. Their problem is that they have not yet sold their own property.
Increased risk of the first home not selling means most lenders are reluctant to offer bridging loans when this happens. The probability of acceptance for an open bridging loan increases with the more equity the borrower holds in their property.Bridging Finance / bridging loans / bridging loans scotland