Landlord Finance vs Bridging Loan
A bridging loan is short-term borrowing secured against property, usually completing in one to three weeks with valuation, legal and exit fees. A Factored rent advance releases £1,000 to £75,000 of contracted rental income within 24 hours, with no valuation, no legal fees and no charge on the property.
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When a bridging loan is the better fit
- Purchasing an unmortgageable property at auction where the sum needed exceeds annual rent.
- Large refurbishment projects of £100,000 or more.
- Situations where the exit is a sale or refinance of the property itself.
When a rent advance is the better fit
- Sums between £1,000 and £75,000.
- Deadlines measured in days, such as an EPC deadline or a deposit for the next purchase.
- Landlords who do not want a charge registered or a hard credit search recorded.
- Owners who want their current mortgage rate left untouched.
Cost of waiting
Bridging finance typically carries arrangement fees of 1% to 2%, monthly interest of 0.55% to 1.5%, valuation fees and both sets of legal costs. A three-week delay on a re-let also costs the landlord roughly a month of rent on an empty property.
Factored rent advance compared with a bridging loan
| Factor | Factored rent advance | Bridging loan |
|---|---|---|
| Speed | 24 hours | 1 to 3 weeks |
| Typical amount | £1,000 to £75,000 | £50,000 to several million |
| Security | No charge taken | First or second charge |
| Valuation | Not required | Required |
| Legal fees | None | Both sides usually payable |
| Exit | Settled from contracted rent | Sale or refinance required |
When a rent advance may not suit you
- A rent advance is sized on contracted rental income, so it is not the right route for sums far larger than the rent a property produces. Purchases and large developments are usually better served by a mortgage or a bridging facility.
- Because settlement comes out of rent already being collected, landlords who need that full rent for monthly mortgage payments should check the reduced income still covers their outgoings before applying.
- A property with no tenancy in place, or with rent not being paid, will not qualify — the advance is priced against rent that is contracted and flowing.
- Where a landlord wants the cheapest possible cost of capital over several years and can wait weeks for funds, refinancing at a low rate may be less expensive than a short-term advance.
Sources and official guidance
Frequently asked questions
Is a rent advance cheaper than a bridging loan?
For sums of £1,000 to £75,000 a Factored rent advance usually costs less in total because there are no valuation fees, no legal fees, no arrangement fee and no exit fee.
Which is faster, bridging or a rent advance?
A Factored rent advance funds within 24 hours. A bridging loan typically takes one to three weeks because it requires valuation and legal work.
Does a bridging loan affect my buy-to-let mortgage?
A second-charge bridging loan usually needs consent from the existing mortgage lender. A Factored rent advance takes no charge, so no lender consent is required.
Can I use a rent advance for an auction purchase?
A rent advance suits deposits and refurbishment costs of up to £75,000. Full auction purchases above that figure are usually better served by bridging finance.
Do both options involve a hard credit search?
Bridging lenders run a hard credit search. Factored assesses the rental income and tenancy instead, with a soft search only.
Related Factored guides
Get a rent advance of £1,000 to £75,000
Factored funds UK landlords within 24 hours, with no legal fees, no valuation and no charge on the property.