We know that sometimes Bridging can get a little confusing with all of the acronyms and jargon. That’s why we decided to provide a little glossary to help anyone new to the industry with it.
Administration fee
This is a fee taken from the client by a company in order to set up their loan. It can also be called an arrangement fee.
Arrangement fee
This is a fee taken from the client by a company in order to set up their loan. It can also be called an administration fee.
BBR
The bank base rate is set by the Bank of England and it determines what the central bank pays to commercial banks, while also influencing the rates they themselves set.
CCJ
County court judgements are issued where someone takes court action against someone else. This is usually done where it’s claimed that money is owed but there has been no response.
Commercial
This is used to describe a property which is only used for business purposes. No-one will live in this building. This could include a factory, or office block.
Commitment fee
A commitment fee is taken from the client by a lender to secure the loan while legal documents are being drawn up. The commitment fee is a promise between a client and a lender that the deal will go ahead and is usually refunded when the client has the amount agreed in the loan sent to them.
DRO
Debt Relief Orders provide a way to deal with debts where less than £30,000 is owed, the debtor doesn’t have much spare income, and does not own their home.
Exit fee
This is a fee charged by a lender to a client on redemption of their loan. Some lenders do not charge exit fees but those that do calculate them in different ways – including as a percentage of the loan or a fixed fee. Early redemption of a loan may incur a fee.
First charge
A charge is the lender stating that they are taking a property as security on a loan. First charge means that this is the first debt that would be paid off if the property was to be sold.
HMO
A HMO is an acronym for ‘House in Multiple Occupancy’.
IVA
An Individual Voluntary Arrangement is an agreement made with creditors to pay back all, or part of owed debts.
Loan completion
This is when, following all legal documents being in order, that a loan is approved, and the money sent to the client. This can also be known as Loan drawdown.
Loan drawdown
This is when, following all legal documents being in order, that a loan is approved, and the money sent to the client. This can also be known as Loan completion.
Loan redemption
This is when all money that a client has borrowed has been paid back to the lender, including any interest.
LTV
Acronym for ‘Loan to Value’ which compares the amount lent to a client, to the amount their security or asset is worth. For example, lending £50k to a person with an asset worth £100k, would produce an LTV of 50%. Having a lower LTV will normally get you preferential rates on loans.
POA
A price on application means the amount paid/charged will be dependent on the client’s individual application and circumstances.
Rate
This refers to the amount of interest a client will need to pay back on top of their initial loan amount. Bridging lenders usually state it as either a yearly percentage rate, or a monthly percentage rate. We state our rates showing a monthly percentage.
Rate Deferral
Deferring part of the interest payments that’ll be due to a later date. This can be done for up to 9 months.
Refinance
This is used to describe one of the ways in which a bridging loan can be paid back. Borrowers often get a longer, cheaper way of borrowing money to replace the short-term bridging loan. Often, a new long-term form of finance takes longer to put in place, hence why bridging is used.
Residential
This is used to describe any type of building where people will live. This could include houses, apartments or any other type of building the people typically live in.
Revert Rate
This is the rate available to investors when their fixed rate period ends. Once it ends, the rate “reverts” to this base level.
Term
This is the length of time that the money is loaned out for. For example, if you borrow money for 12 months, it has a 12 month ‘term’.
Second Charge
This is where a lender takes a property as security, but where the property already has a first charge. A first charge loan is paid back before a second charge loan. This usually makes the rate of the loan higher on a second charge finance.
Semi-Commercial
This is used to describe a property that is used both for residential, and commercial purposes. An example would be a property where the ground floor is a clothing shop, and all remaining floors are apartments.