A bridging loan is a facility to buy a property before selling the existing one. It helps you buy property, especially on short notice. For example, you won a property at auction but cannot pay the whole price right now. Here, you can use one of your properties as collateral to get cash immediately. It helps you capitalise on the opportunity.
However, have you heard about multi-asset security loans, also known as cross-charge bridging loans? It is a short-term bridging finance solution that helps you stake multiple properties as security on a single loan. Wondering why you may need it? Read ahead!
What are multi-asset bridging loans?
Multi-asset or cross-charge bridging loans are a specialised form of short-term property finance that allows borrowers to use multiple properties as security for a loan. It is unlike a standard bridging loan, which relies on one property as collateral. The main purpose of the loan is to provide a higher amount.
Most individuals demand a 100% LTV or loan-to-value ratio on the loan. It means getting 100% the price of the property for financing their residential and commercial dreams. However, getting 100% LTV on one property is impossible. According to KP Finance, “one may get up to 75% (maximum) LTV on general bridging loans.”
Thus, cross-charge bridging loans help distribute the costs of property purchase across different securities. It potentially offers more advantages than the standard loan. You may get up to 10 million pounds for your needs. You can use the multi-asset bridging loans for residential homes, commercial buildings, and mixed-use developments.
How does cross-charge bridge loans work?
The process of cross-charge bridging loans begins with an application and credit assessment. The loan providers and brokers evaluate the properties offered as security for the loan. They calculate the future value of each property to provide the final LTV.
They analyse and provide the final quote after understanding your cash needs, finances, and collateral. In this, the loan costs are spread over multiple properties. Here are the simple steps involved:
- Step 1- You offer 2 or more properties as collateral according to cash needs
- Step 2- The loan provider calculates the combined value
- Step 3- You get one loan secured against multiple assets
- Step 4- Once approved, you get cash for buying property, development, auction buys, etc.
- Step 5- You pay the loan by selling, refinancing, or completing the development and refinancing
- Step 6- charges are removed once you repay the dues
How can a multi-asset bridging loan reduce risk and benefit you?
Multi-asset means using more than one property as collateral to get a loan. You can use a combination of residential, commercial, buy-to-lets, land, and mixed-use properties to get a loan. Here are the benefits of using one:
- Reduces risk and fetches better terms
When the loan provider has multiple assets to fall back on, the risk reduces. They may claim assets according to the remaining dues. Thus, you may get low interest and affordable terms here.
It is the reason individuals with a chequered credit history seek bridging loans with bad credit in the UK marketplace. It helps them qualify for the loan quickly and reduces the cost of the loan. Credit score does not prove to be an obstacle in that case.
- Grants high borrowing power
Moreover, you may get a higher amount than the usual loan by pledging multiple assets. It gives you the flexibility to use it according to your needs. Most individuals find that a particular asset does not help them get the desired amount. Thus, they seek other options and oftentimes lose the opportunity.
Here, multi-asset bridging loans come as a rescue. It grants the power to borrow higher limits by staking multiple assets. However, the total value of the assets should be higher than the amount required. Here are some benefits of high borrowing power:
- Close funding gaps quickly
- Bridge multiple transactions at once
- Unlock equity across your portfolio
Such aspects are useful for buy-to-let owners, landlords, developers, business owners with mixed assets, and chain break scenarios.
- Offers more comfort in urgency
Getting a huge bridging finance requires compliance, legalisation, meeting laws, and other permits. However, multi-asset bridging finance saves you from all that formalities. It proves comfortable when you need finance for non-standard commercial or residential property.
In this case, planning permission remains pending for a long time. Thus, this finance may help you get a quick loan approval without waiting for the planning permission. For example, you can buy the property you won at auction quickly without engaging in paperwork and other permits.
- Provides better support for investments
If you are a property developer or investor, you too may benefit from multi-asset security bridging finance. Here is how:
| Property developer | Investor |
| Use multiple assets to secure a project | Acquire new properties without selling the ones you have |
| Refinance quickly after project completion. | Use cross-charging bridging loans to improve *–=IU65F4RSXWZx Cthe portfolio.zxaQSWT5467U89-0 |
| Leverage equity across multiple sites. | Manage cash flow effectively. |
Explain Cross bridging loan with an example
Julia is a property investor who wants to buy a 450,000 to purchase a buy-to-let at an auction. Shen must complete the purchase within 28 days and does not have much cash available. However, she owns 2 properties with good equity.
| Property 1- rental house (in pounds) | Property 2- Flat (in pounds) |
| Value-300,000 | Value 200,000 |
| Existing mortgage – 100,000 | Existing mortgage-60000 |
| Equity-200,000 | Equity-140,000 |
How the cross-bridging loan works:
She applies for a loan to understand the approval chances and approximate amount. She does so to get a monthly instalment loan with no credit check requirements. It helps you know the amount and loan approval chances without affecting your credit score. Here is what she gets a quote:
Total value of properties offered as security:
£300,000 + £200,000 = £500,000
Total existing mortgages:
£100,000 + £60,000 = £160,000
Total equity across both properties:
£340,000
She may get up to 70% of the LTV because of the mortgaged properties. So, 70% of £500,000 would be £350,000. This is the amount that she can borrow. However, some loan companies may subtract £160,000 from £350,000. So, she can borrow only £190,000. That’s enough to complete an auction purchase.
Thus, Julia uses the cross-bridging loan to buy a new property by providing two old properties as collateral. She later pays the dues by refinancing the new property.
Bottom line
Multi-asset bridging loans are ideal if you want to borrow a huge amount for a big commercial and residential project. Here, you need to pledge 2 or more assets or properties to get the loan. You get up to 100% of the LTV value in some cases by providing multiple assets as collateral. It is ideal for investors and property developers needing a high amount of up to 10 million quickly.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
