Pricing of Bridging Finance for Property Refurbishment and Development.

Bridging finance offers short-term loans designed to 'bridge' the gap between purchasing a property and securing long-term financing. This type of finance is particularly useful in property refurbishment, development exit finance, and planning permissions assistance loans. Understanding the pricing of these loans is crucial for property developers and investors.

Property Refurbishment Loans

Bridging finance for property refurbishment is ideal for investors looking to renovate a property before selling or refinancing it. The pricing of these loans typically includes:

• Interest Rates: Generally higher than standard mortgages, ranging from 0.5% to 1.89% per month due to their short-term nature.
• Arrangement Fees: Usually around 2% of the loan amount, these fees cover the costs of setting up the loan. And a brokerage fee of between 1% to 1.5%.
• Exit Fees: Some lenders charge a fee when the loan is repaid, often around 1% of the loan amount.

The total cost depends on the loan's duration and the lender's terms.

Development Exit Finance

This type of bridging loan is used when a development project is completed, but the property has not yet sold. It allows developers to repay existing development finance and provides additional time to market the property. Key pricing components include:

• Interest Rates: Typically lower than refurbishment loans, as the risk is reduced post-completion. Rates can range from 0.4% to 1% per month.
• Valuation Fees: An independent valuation is often required, costing between 0.1% and 0.2% of the property's value.
• Legal Fees: Usually borne by the borrower, these can vary depending on the complexity of the loan documentation.

The cost of exit finance is influenced by the property's value and market conditions.

Planning Permissions Assistance Loans

These loans assist property developers in obtaining necessary planning permissions before development. Pricing factors include:

• Interest Rates: Varying from 0.6% to 2.2% per month, reflecting the risk associated with planning uncertainties.
• Arrangement Fees: Generally higher due to the complexity of planning permissions, often in the range of 1.5-2% of the loan amount.
• Monitoring Fees: Some lenders charge for monitoring the progress of planning applications, which can add to the overall cost.

These loans are crucial for developers navigating the planning process, providing financial stability and flexibility.

Conclusion

Bridging finance can be an invaluable tool in property development, offering short-term flexibility and access to funds. However, understanding the pricing structure is essential to ensure it aligns with your financial strategy. By considering the various fees and interest rates associated with property refurbishment, development exit finance, and planning permissions assistance loans, developers can make informed decisions and optimise their investment outcomes.

Fill out our inquiry form or get in touch with us directly if you have any questions about bridging finance! If you need more information to determine the best solution for your needs, please don't hesitate to contact William PW Omony MBA who is a Property Investment Strategist, Property Finance and Mortgage Consultant at Proactive Consult & PWO Finance

Kindly note that the information shared in this blog is for general purposes and is not personalised advice. It is strongly advised that you seek professional guidance or advice before making decisions based on the content of this publication or other materials on our platforms.

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