Property investors from Israel are using bridge finance or ‘bridging’ in order to complete on UK property investments. In 2009, one of Israel’s richest men Nochi Dankner notoriously borrowed £45 million from property financier British Land to purchase offices in Broadgate, near Liverpool Street in London.
Bridge finance is a form of secured finance which is commonly used to complete on property deals that are within a tight deadline. Compared to the traditional mortgage process which may take several months, a bridge loan can be completed within 2 to 4 weeks – making it a popular source of funds for property investors, developers and those looking to escape traditional property chains.
Customers will commonly use this finance to complete on a deal, with plans to renovate or repurpose the building for a greater return, being able to repay their loan in full or refinance under new favourable terms.
The UK’s bridging finance industry is said to be worth around £7 billion per year, based on the amount that was facilitated in 2017. There are approximately 40 to 50 bridging finance providers in the UK, made up a combination of regulated and non-status lenders. The latter means that customers are not required to provide proof of credit history but will be judged on factors such as the property’s current value and its potential for growth.
Bridge finance is always secured against a property, either by first or second charge, and each property is subject to a valuation before completion. The client risks their collateral being repossessed if they are unable to keep up with repayments. Loan terms are typically over 12 to 24 months with the option to repay monthly or rolled up until the end of the loan agreement. Bridging loan fees range from 0.44% to 2% per month with additional fees for administration (around 1%), broker fees (around 2%) and early repayment fees. (Source: Tiger Bridging)