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Broka Learn · Glossary

Bridging and development finance glossary, A to Z

Plain-English definitions of the terms brokers, lenders and clients use every day. Search for a term or jump to a letter.

55 terms

A

A&L (assets and liabilities statement)
A statement of what a borrower owns, such as property and savings, and what they owe. Lenders use it to judge whether a personal guarantee is supported. â–¶ Watch: Personal guarantees and the A&L (2:14)
Arrangement fee
A fee the lender charges to set up the loan, usually a percentage of the gross loan. It is normally added to the loan or deducted from the advance. Try the calculator
Auction finance
Short-term finance to buy at auction, where completion is usually due within 28 days. Speed of valuation and legals matters most.
AVM (automated valuation model)
A valuation generated from sales data and property records. Some lenders accept an AVM on suitable cases instead of a physical inspection, which can save days. â–¶ Watch: How credit-backed loans work (2:03)

B

Bridging loan
A short-term loan secured on property, typically for 1 to 24 months, that bridges a gap until a sale, refinance or other exit. â–¶ Watch: When is a bridging loan the right tool? (1:23)
Buy-to-let mortgage
A longer-term mortgage on a property let to tenants. Often the exit for a bridging loan once a property has been refurbished or let.

C

Chain break
When a link in a property chain fails. A bridging loan can let the buyer complete on their purchase before their own sale goes through.
Closed bridge
A bridging loan with a fixed, confirmed exit date, for example where contracts on the sale have already been exchanged.
Completion
The point at which funds are released, the purchase or refinance is finalised and the lender's charge is registered. â–¶ Watch: From application to completion, a four-part series
Credit-backed offer
An offer from a participating lender that has already been through full underwriting, rather than a decision in principle. Available on Broka with participating lenders on suitable cases. How credit-backed loans work â–¶ Watch: How credit-backed loans work (2:03)
Credit committee
The lender's internal panel that reviews and approves a case before a formal offer is issued. â–¶ Watch: What an indicative offer really means (0:50)

D

Day-one advance
The amount released at completion. On development and refurbishment loans, further funds follow in drawdowns.
Decision in principle (DIP)
An early indication that a lender is willing to lend, subject to valuation, underwriting and legal checks. It is not a formal offer. â–¶ Watch: A DIP is not an offer (0:46)
Default interest
A higher rate the lender can charge if the borrower breaches the loan terms, such as missing the redemption date.
Desktop valuation
A valuation by a surveyor using data and records, without visiting the property. Faster and cheaper than a full inspection, where the lender allows it. â–¶ Watch: How credit-backed loans work (2:03)
Development finance
Funding for ground-up builds or major conversions, usually covering part of the land cost and released in stages to pay for construction.
Drawdown
A tranche of funds released during the loan, usually after a monitoring surveyor confirms a stage of works is complete.
Dual representation
One firm of solicitors acting for both the lender and the borrower. Where the lender allows it, it can cut legal time and cost. â–¶ Watch: How credit-backed loans work (2:03)

E

Equitable charge
Security over the borrower's beneficial interest rather than the registered legal title. Often used as additional security.
Exit fee
A fee paid when the loan is repaid, usually a percentage of the loan. Many bridging lenders charge none.
Exit strategy
How the loan will be repaid, usually by a sale, a refinance onto a term mortgage or other funds. Lenders look at it closely.

F

First charge
The primary legal charge over a property. The first charge lender is repaid first if the property is sold.

G

GDV (gross development value)
The expected value of a development once finished, or of a property after refurbishment.
Gross loan
The full amount borrowed, including fees and any retained interest added to the loan. Try the calculator

H

Heavy refurbishment
Works that typically need planning permission or building regulations sign-off, such as structural changes, extensions or a change of use.
HMO (house in multiple occupation)
A property let to three or more tenants from more than one household who share facilities. Larger HMOs need a licence. â–¶ Watch: How one detail changes the terms (1:12)

I

Indicative terms
A lender's initial view of rate, fees and loan size based on the information given. Subject to valuation and underwriting. â–¶ Watch: What an indicative offer really means (0:50)

L

Light refurbishment
Cosmetic or non-structural works, such as a new kitchen, bathroom or rewiring, that do not need planning permission.
LTC (loan to cost)
The loan as a percentage of total project cost, meaning purchase plus works. Common in development finance. Try the calculator
LTGDV (loan to gross development value)
The loan as a percentage of the finished value. Development lenders often cap the loan by LTGDV. Try the calculator
LTV (loan to value)
The loan as a percentage of the property's current value. The main measure of risk for most bridging lenders. Try the calculator

M

Mezzanine finance
A further layer of lending behind the senior debt that increases total leverage, at a higher cost.
Monitoring surveyor
An independent surveyor appointed by the lender to check build progress and costs before each drawdown is released.

N

Net loan
The amount the borrower actually receives after fees and any retained interest are deducted from the gross loan. Try the calculator

O

OMV (open market value)
What a property would sell for on the open market with a normal marketing period. Some lenders lend against a lower 180-day or 90-day value, which assumes a quicker sale. â–¶ Watch: OMV, 180-day or 90-day valuation (0:16)
Open bridge
A bridging loan with no fixed exit date. The lender still needs a credible exit strategy.

P

Permitted development
Certain works or changes of use that can go ahead without a full planning application, subject to conditions.
Personal guarantee
A promise by an individual, often a director of the borrowing company, to repay the loan if the borrower cannot. â–¶ Watch: Personal guarantees and the A&L (2:14)
Planning permission
Formal consent from the local authority to build on, or change the use of, land or property.
Proc fee (procuration fee)
The fee a lender pays the broker for introducing a case that completes.

R

Redemption
Repaying the loan in full, usually from the exit.
Refinance
Replacing an existing loan with a new one, for example moving from a bridge onto a buy-to-let mortgage.
Regulated bridging
Bridging for a regulated entity, defined by the FCA, usually secured on a home the borrower or a close family member lives in or will live in, or for personal use. It is regulated by the FCA, so only authorised firms can arrange it.
Retained interest
Interest for the full term is calculated up front and held back from the loan. There are no monthly payments, but the gross loan is higher. Try the calculator
Rolled-up interest
Interest is added to the balance each month and paid in full at redemption. There are no monthly payments. Try the calculator

S

Second charge
A charge that ranks behind an existing first charge. The second charge lender is repaid only after the first.
Senior debt
The main, first-ranking loan in a funding structure.
Serviced interest
Interest the borrower pays monthly, as with a standard mortgage. Usually the lowest total cost. Try the calculator
SPV (special purpose vehicle)
A limited company set up only to hold property or carry out a project. Many lenders prefer to lend to SPVs.
Stretched senior
A single loan at higher leverage than standard senior debt, which can remove the need for separate mezzanine finance.

T

Term
The agreed length of the loan. Bridging terms usually run from 1 to 24 months.
Title insurance
A policy covering certain defects in legal title, sometimes used in place of full searches to save time.

U

Unregulated bridging
Bridging for investment, commercial or business purposes, where nobody connected to the borrower will live in the property. It is not regulated by the FCA.

V

Valuation
A surveyor's assessment of a property's value, instructed by the lender to confirm the security for the loan. â–¶ Watch: Valuation (0:33)

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