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Bridging Finance Risks

I deal with bridging finance risks on a daily basis. A lot of landlords don’t like bridging, others do and the purpose of this post is not to sell the concept but to make people aware of some of the pitfalls when signing an agreement.

Like everything in life the vast majority of lenders and brokers are perfectly acceptable and do a good job but there are a few issues that not everyone is aware of. We’ve all seen the recent problems with West Bromwich and Bank of Ireland and that’s all down to terms and conditions and how they are looked at.

Bridging is similar. There is a lot of paperwork, you can’t always easily compare one lender to another and you might be under pressure financially or by time to complete quickly.


• Term of loan. If you can’t apply for a remortgage until you have owned a property six months then why is the loan six months or less? On average it takes two months to complete so the term should be at least nine months. Is it so the lender can charge you extension fees or default interest, or that the transaction hasn’t been explained to them fully?

• Redemption Lenders or as I call them library lenders. They wait for a loan to be repaid (book brought back) and then lend it out again quickly. The lender only has a small amount of funds and issues offers on the expectation they will have money at completion. You have exchanged contracts and your lender doesn’t have the money to complete.


  1.  Monthly or daily. Loan set up 7th October and repaid 7th December. That’s 2 months and one day or three months depending on who the lender is. At an average margin of 1.25% that can be a lot of money.
  4. You have a loan for eight months and repay after three. Interest has been retained so your are expecting five months back. With some lenders you won’t-they keep it. Always ask what happens when repaid early.
  5. Don’t be swayed by the rate. Add all the costs up to compare including valuation.


• Default interest. If you are late paying then rates can stay the same go up to 48% or worse. Some lenders even back date this!! Always ask what their policy is if the loan is late being repaid.



As a side issue I’ve recently spoken to a new client who was fleeced £10,000 in fees by a so called commercial broker. If you get asked to pay large application fees or a for a valuation then be careful.

Certainly with a valuation fee you should only do this once you have completed an application and had terms from a lender. Any fees up to this stage should be nominal.
