Is bridging more expensive than a mortgage? Yes – but here’s why

Ask anyone new to short-term bridging finance what they know about it and you’ll likely be met with some common threads: that it’s expensive, a last resort, overly complex and onerous (to name a few).

That first one – cost – comes up time and time again. So – is it a myth, or is there some truth to it?

I’ll just come out and say it: bridging finance is more expensive than, say, a traditional residential mortgage. But there are a number of important reasons why that’s the case.

Let’s start by looking at a couple of scenarios where borrowers need (rather than want, which I’ll come to later) bridging finance.

How and when bridging can help

• Customer is downsizing – has no mortgage on their property but their buyer has just pulled out putting the chain at risk (classic chain-break)
• Customer took out development finance to build a property but Covid caused delays to build. It’s ready to sell now but the development finance loan needs to be repaid before the sale will complete (customer with specialist need)
• Customer has found a property in a great school catchment area, but it’s run down and doesn’t have a working kitchen or bathroom (property is unmortgageable in current condition)

What threads through all the above examples is that a typical mortgage isn’t, and could never be, the solution to these situations. Alternative short-term finance is needed instead.

So, when brokers say to me that bridging is expensive, I urge them to ask: “Compared to what?” Bridging finance is more costly when compared to a mortgage, but that comparison is like standing an apple next to a pineapple (to coin a phrase).

Why would you compare bridging rates to mortgage rates when a mortgage literally isn’t an option? Bridging is more expensive because you’re paying for the solution to a short-term problem – and you need it, rather than want it. Nor is it a ‘last resort’ – it’s actually essential if you want to complete your transaction.

How and where Masthaven can help

Masthaven Bank has recently revamped its bridging range, making short-term finance streamlined, simple and built to meet the needs of your customers – making bridging far less complex and onerous than you might think.

Bridging

In a nutshell

Our core bridging product. Perfect for all sorts of situations where time is of the essence: chain-breaking, downsizing and upsizing, where customers are required to pay quickly. It’s aided by our portal, which allows you to get an illustrative Quick Quote in seconds, or an auto or credit-backed decision.

Rates from 0.48%.

Specialist Bridging

In a nutshell

Got a case that doesn’t quite fit the standard mould? Choose Specialist. Borrowers with financial blips and cases with unusual properties considered. This refreshed product offers a lot of scope – we also offer cross-charge on extra securities, re-bridging and consider properties above commercial units or those with shorter leases.

Rates from 0.63%.

Refurbishment

In a nutshell

Help your customers realise their renovation dreams. Our refurbishment product is split into two: Refurbishment covering everything from new kitchens, bathrooms, central heating and roof coverings, and Heavy Refurbishment covering works that require building regulations or planning permission including multi-unit conversions.

Rates from 0.53%.