Type

Informal Name

How it works

Example

Time to get money back

Pros & Cons

Want to know more?

Type A

6 month bridge,

Open bridge, Traditional bridge

1.  Get property valued up in excess of purchase price

2. Buy property using bridging funds at 100% of purchase price as bridger lends based on valuation

3. hold property with bridging funds for 6 months

4. Remortgage with traditional lender

1. Valuation of property £100k

2. Purchase price £70k

3. Bridging Funds released (70% of valuation) = £70k

TOTAL MONEY IN: Nil

6 months later a remortgage is done:

1. Valuation £100k

2. Remortgage at 75% of valuation = £75k

3. £75k is used to clear bridging funds of £70k and bridging interest of £5k.

Total money in: Nil

6 months

Pros

• Easy to purchase as requires no collaboration with vendor
• Can choose any lender after 6 months

Cons

• Have to wait 6 months to get your money
• Bridging is expensive (typically 1.25% per month) so need to get high BMV
• Property might hae declined in value after 6 months

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Type B

Bridge and Remortgage, same day bridge, daylight bridge

1.purchaser gets a valuation in excess of purchase price

2.purchaser buys property with bridging funds at purchase price

3.On the same day purchaser remortgages the property at the higher valuation

1.Valuation of property £100k

2.Purchase price £70k

3.Buy property with bridging funds £70k

Total Money In: Nil

On the same day or 1 day later:

1.Remortgage at 70% of value (70% x £100k) = £70k

2. Clear bridging funds of £70k

Total Money In: Nil

1 day

Pros

• Simple
• No need to state purchase price at valuation

Cons

• Limited lenders

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Type C

Purchase and further advance

1.purchaser gets a valuation in excess of purchase price

2.buys property at purchase price and puts deposit down

3.immediately goes in for a further advance once first mortgage payment has come out and gets deposit monies back from further advance

1. Valuation of property £100k

2. Purchase price at £70k

3. Buy property with 30% deposit (30% x £70k) = £21,000

Total Money in: £21k

Within 2 months:

1. Apply for a further advance based on valuation of £100k

2. Further advance is 70% of value less outstanding mortgage which is £70k - 49k = £21k

3. This £21k replenishes the £21k you used to buy the property with

Total Money In: Nil

2 months

Pros

• Simple
• No need to state purchase price at valuation

Cons

• Limited lenders

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Type D

Back to Back, assignable contracts, Option Agreements

1.Middle person buys property from vendor at below market value

2.Middle person sells on property to investor at full market value and lends them the deposit

3.Mortgage funds raised using this borrowed deposit

4. Deposit comes back on completion to the middle person and the rest of the funds go to the vendor

1.Valuation of property  £100k

2.Middle person gets the right to buy the property for £70k by using an option agreement

3.the middle person sells on the property for £100k and lends the deposit of £30k to the buyer

4.sale goes through at £100k and the vendor gets their £70k and the £30k comes back to the middle person.

Total Money In by buyer: Nil

1 day

Pros

• Higher purchase price great for mitigating capital gains tax

Cons

• Restricted number of lenders

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Type E

Bridged Deposit, Loan Rebate Scheme

1.purchaser gets valuation in excess of agreed purchase price

2.purchase price set at valuation figure

3.purchaser borrows deposit from loan company

4.vendor agrees to pay loan company a finders fee equal to amount of deposit borrowed by purchaser

1.Valuation of property £100k

2.Purchase price £100k

3. Buyer borrows £30k deposit off loan company

4.Lender lends 70% of £100k = £70k

5.£100k goes to vendor and £30k comes back to the loan company

Total Money in: Nil

1 day

Pros

• Can use all lenders

Cons

• Vendor needs to use your solicitor

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Type F

Borrow Deposit

1.purchaser borrows deposit via remortgaging of current home or portfolio, off credit cards, get an overdraft, unsecured loan or off family.

2.Uses these funds as a deposit to raise mortgage

3. Remortgage at higher value when property prices rise to clear loan taken out for deposit

1.Valuation of property £100k

1. Buyer borrows £30k from family, credit cards, remortgaging etc.

2.Lender lends £70k based on 70% of £100k valuation

3. buyer purchases property

Total Money in: Nil

6+ months later whenever prices have risen to £150k:

4.Go in for a remortgage at 70% of value = £150k x 70% = £105k.

5. Redeem current mortgage of £70k and £30k additional borrowing from credit cards etc. Surplus £5k.

Total money in: Nil

6 months+

Pros

• Can use all lenders
• Simple!
• Great in a rising market

Cons

• Deposit fund borrowings will have to be paid over a shorter period of time thus pushing up the monthly payments overall

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