Overseas bridging finance

Myles

Author: Myles Robinson - Advisor

Posted: May 10, 2022

Overseas bridging finance – Full guide, costs & rates

Have you ever considered buying property abroad as an investment, a family or personal getaway, or possibly even a place where you can enjoy your retirement later on in life. If the notion of overseas property appeals to you, then you ought to look into overseas bridging finance.

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What Is Overseas Bridging Finance?

To review, bridging finance – also known as bridging loans – is a short-term property-backed financial instrument. You can access a wide range of bridging finance rates from over 200 UK lenders and many overseas lenders and investment firms.

Banks and lenders usually offer bridging finance for a period of as short as two weeks or a maximum of 18 months. They are commonly used by those who wish to purchase a new home or a piece of industrial or commercial property but do not have ready funds for the transaction to take place.

Bridging finance calls for a clear exit strategy as an assurance to the lender that it will be paid off at the end of the stipulated period. These funds for payment usually come from the proceeds of one’s old house or the rent collected from a refurbishment, sometimes funded from refurbishment loans from commercial clients.

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Overseas bridging finance to purchase property works on a similar principle: it is a short-term funding solution for buying property overseas, regardless of whether it’s for a holiday home, a timeshare, auction finance loan or an offshore investment or expansion option for a corporate entity. Usually, international transactions are typically unregulated bridging but there are still many cases that are regulated.

Why Would You Get Overseas Bridging Finance?

  • Overseas bridging loans give you time to sell an existing property in the UK. You can settle the remaining balance on an overseas property purchase or arrange for more traditional finance;
  • It enables you to make prudent – and quick – decisions regarding overseas properties that are going fast. You can expect loans released within 24 hours; and
  • If you aim to purchase property at an auction, having a bridging loan in hand ensures that you have available cash for a successful transaction.

Whether you need overseas open bridging finance or closed bridging finance for overseas purchasing we can help source you the best bridging loan lenders possible tailored to your circumstances.

On What Occasions Would You Need Overseas Bridging Finance?

Overseas property bridging loans come in handy for individuals under the following circumstances:

  • If you find an ideal overseas property that requires an immediate offer or an urgent sale;
  • The property you’re interested in is under a complex title under local property laws;
  • You cannot access your main financial lenders/partners due to distance; or
  • A long mortgage application with a traditional lender wouldn’t be a practical choice given the location.

You should compare bridging loans to get the right lender and rates with both UK and international bridging finance.

How Does An Overseas Bridging Loan Work For An Overseas Property?

Let’s say you paid a substantial deposit on a house or any other piece of property abroad. However, given the challenge of raising finance to pay off the balance in the country where the property is located, you’re in danger of losing that deposit and the property.

If you go for an overseas bridging loan, you will have the finance to tide the transaction over. The loan can be secured for a few weeks or months on an existing home or any other UK-based property you have. This runs for the period covering the time between the date of purchase and the maturity date of the endowment.

Note that overseas bridging loans can be used to cover up to 75 per cent of a property’s loan-to-value (LTV.)

What Can Overseas Bridging Loans Be Used For?

Most bridging loans can be used to cover the cost of purchase, construction finance, or refurbishment of any of the following abroad:

  • Property for residential, commercial, or mixed-use;
  • Raw, undeveloped land;
  • Hospitality venues such as hotels and resorts;
  • Corporate structures such as office buildings and towers;
  • Industrial property and/or warehousing facilities;
  • Build-to-rent property;
  • Retail structures or enclaves; or
  • Development exit bridging.

For those who want to purchase overseas properties for business, these bridging loans can:

  • Be used to pay for the conversion of commercial property into a residential zone;
  • Serve as temporary financing for property purchases prior to the placement of commercial finance instruments;
  • Be used to pay local/national taxes in the country where the property is located;
  • Serve as financing for a startup or franchise;
  • Serve as finance for commercial business auctions; and
  • Be used to pay to extend a standing business lease.

What Should You Look For In Overseas Bridging Finance?

Regardless of whether you’re using it to purchase, build, or renovate domestic or offshore properties, a good bridging loan should work on your terms. In this case, it is best to ask for the following details:

  • What is your ideal duration for the loan?
  • How many weeks or months will it take you to completely pay it off?
  • What are the borrowing limits stipulated by your lender/lenders?
  • Do your lenders offer flexible interest payments?
  • Do your lenders offer rolled-up interest that you can pay for in one go upon the completion of the project?
  • Will the interest on your loan be serviced monthly or can you and the lender agree on different terms?

It’s important to know the pros and cons of bridging loans in order to make an informed decision with your broker on if the international bridging finance is right for you. Some lenders can offer overseas bridging finance for poor credit in circumstances whereby you have good assets to lend against.

Things To Remember Before Securing Any Type Of Bridging Finance:

  • Regardless of what type of finance options you avail of, lenders will ask you to present a clear exit strategy prior to approval and part of their criteria for bridging loans. We have stated before that your exit strategy is the manner by which you will repay the full amount of the loan by the time its maturity date rolls around. For the most part, exit strategies usually involve using the profit earned on the sale of existing UK property to repay your loan.
  • To avoid paying monthly interest on a bridging loan, ask if you can roll out the interest and pay it at the end of the finance’s duration. Rolling out the interest enables you to direct the full amount of the loan to your purchase of property abroad as opposed to using it to service monthly interest payments. You do, however, need to pay the full amount upon maturity of the loan.

Get In Touch With Loan Corp

Don’t second-guess your overseas bridging loan needs. Get in touch with an expert broker like us for bridging finance advice and a fast quote. Read our bridging finance example for information on how bridging works.

To get some online indicative prices, use our bridging loan calculator to work out potential costs.

For more information, fill out the contact form here

 

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