In This Article
What is an HNW bridging loan?
A HNW bridging loans are short term loans for a high net worth individual. The definition of a HNW person seems to vary from resource to resource and also change over time but a common answer is somebody with a net worth of £10M (so this could be made up of equity within properties, companies, cash, investments etc).
A bridging loan is a short-term loan that is secured against the property using it as collateral. It can be used to buy a new property before selling the old one, which can be of risk you’re taking out two mortgages at once.
They can also be used to buy properties that would not qualify for a standard mortgage with the intention of improving them and refinancing in the future back to a standard term mortgage.
HNW individuals sometimes get different terms due to the loan size, assets available as security or borrowing experience.
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Are HNW bridging loans regulated?
The difference between a regulated and an unregulated bridging loan is going to be down to what the money is for and what it is being secured against. This is no different to HNW bridging loans.
Regulated bridging loans are intended for properties that are to be occupied by the borrower or the family so this would often mean the main home, not an investment property.
An unregulated bridging loan is used to buy a property that is not designed to be lived in by you or your family, for example, buying an investment property or a commercial property for a business to occupy.
If you’re taking a regulated bridging loan, make sure your broker is regulated by the Financial Conduct Authority. The FCA register can be found here.
Most commercial mortgage and bridging brokers will be members of the National Association of Commercial Finance Brokers.
What is the maximum I could apply for with a HNW bridging loan?
There is no definitive answer here and in reality, an HNW individual may be able to apply for any amount assuming they have the assets to lend against in the first place. For example, if an investor or a company owned a commercial building in London worth £100 million, there would be a lender that may offer a HNW bridging loan for £50 million if the deal made sense.
There would of course be a lot to look at in a scenario like this but it’s not impossible if the security for the loan is there and all makes sense.
What is the difference between a HNW bridging loan and a standard bridging loan?
When a bridging loan is referred to as HNW, the amount of the loan and net worth of the applicant can vary but often it is referred to for bridging loans above £1 million.
In theory, a HNW bridging loan works the same way as a standard one but as the loan is for a HNW individual and the loan is large, they can have different terms.
Firstly, due to the size of the loan, it may be that other lenders that would have considered lending will no longer as it is above their maximum loan threshold. The loan size may also result in a lower rate of interest than a much smaller one as the lender is making more money.
Also, due to the borrowers’ assets and often being seen as financially savvy, some lenders will consider the applicant very credible for the finance if they see past experience and may offer a lower interest rate as a result.
It will depend from lender to lender but to find out, it’s best to speak with a bridging broker that has HNW experience. If you would like I NEED ADVICE to put you in touch with a broker with the relevant experience, please complete the contact form.
What is the difference between a HNW bridging loan and a HNW mortgage?
HNW bridging loans are short term finance solutions so usually up to 24 months with the intention to repay them by refinancing or selling the asset. They are at a higher rate of interest to that of a standard mortgage and can have higher fees too.
Interest is often added to the loan in advance so there is a gross loan (total to be paid back) and then a net loan (the total that the borrower receives).
Standard HNW mortgages are designed to be over a longer term, for example, 25 years either on an interest only basis or full repayment. They are linked to the borrower’s affordability so assessing income is a major part of it.
You may consider taking a bridging loan of this sort if you’re buying a premium property at auction. If you wanted to look into buying from a property auction, a popular company is Allsop.
Do I need a high income to get a HNW bridging loan?
When taking a bridging loan, the interest is often retained, added to the loan and then cleared on repayment of the loan, for example after 12 months when refinancing the asset.
If this is the case, the lender does not need to take your income in to consideration as it’s not being used to make monthly payments.
It is possible though to get bridging loans where the interest is paid monthly. If you are choosing to take the loan on this basis, the lender needs to see that you are in a position to make the monthly payments and will need to get a full understanding of what your income is and how it’s made up.
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Should I take professional advice when taking a HNW bridging loan?
Absolutely, due to the amount that you are borrowing and the rates involved, taking bridging finance is risky and it can quickly roll up. You should talk with a professional bridging finance broker so they can look at your full situation and make a tailored recommendation accordingly.
I NEED ADVICE can arrange this for you if you complete the contact form on this page.
Should I talk to my own bank about HNW bridging loans?
We wouldn’t encourage people not to speak with their own bank as it may be that they can offer them a better deal than the rest of the marketplace. It is however unlikely that given the specialist nature of HNW bridging loans, your bank offers the best deal. This is because there are many lenders out there, the chance of you banking with the one that offers the best product is slim.
We would say to ask your bank by all means but to also speak with an independent professional broker to look at what your bank can offer (assuming they will) versus the rest of the marketplace.
Do I need a local face to face broker for a HNW bridging loan?
You do not need to be local to your broker for them to arrange a HNW bridging loan and some of the most experienced brokers may be located at different ends of the country. Many brokers carry out business over the phone which can be more convenient for the borrower too due to work commitments.
If you feel you would only be comfortable taking advice on a bridging loan if you met on a face to face basis, then you should seek a local broker asking for referrals and reviews.
I NEED ADVICE work with professional bridging brokers that work on a national basis.
If you need to borrow a large sum of money on a short term basis, have the security to do so and have a clear exit strategy, a HNW bridging loan may be the answer you’re looking for.
Bridging finance isn’t cheap and professional advice should always be taken.
For a free consultation to know your options, please complete the contact box.