from £50,000 – £25,000,000
Funds paid out within 48 hours
1st, 2nd, 3rd Charges Considered
Up to 90% LTV
How Can Loanable find me a Bridging Loan?
By quickly processing your application with all the main bridging loan companies, Loanable can help you find the right bridging finance deal.
The bridging loan market has become increasingly active as more lenders seek to service the short-term financing needs of both businesses and consumers. Many new bridging lenders have entered the market and while older ones have improved their product offering.
We have worked hard to keep continually abreast of the bridging market and consequently can you give real time access to all the main lenders – help you find the best and most appropriate deal.
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What is a Bridging Loan?
A bridging loan is a secured short term ‘interest only’ loan that bridges a financial gap while a more permanent form of finance is secured.
A bridging loan is a secured short term ‘interest only’ loan that bridges a financial gap while a more permanent form of finance is secured. Mostly used for property deals, it’s money that is available almost immediately, giving the borrower time to secure more long term and usually cheaper financing – such as a mortgage or sale.
There are 2 critical factors that lenders consider in bridging finance:
- Value of Security Being Offered – How Much Is the Asset Worth?
- Exist Route of Borrower – How Is the Bridge Going to Be Paid Off?
Before taking out a bridging loan you must have a clear idea on both points.
Bridging Loan Example
An amateur property developer has found a dilapidated property for sale. He can get it cheaply if he can move quickly.
He has £200,000 of his money he can put down but needs another £150,000 to close the deal and renovate it.
Traditional mortgage lenders will not provide finance because the property is dilapidated. He uses a bridging loan to secure the property and complete renovations.
Once the renovations are complete the property is worth significantly more. He sells the property clearing the bridging loan and making a nice profit for himself.
How Much Can I Borrow?
The amount of money available to borrow is completely dependent on the equity value of the property being used for security. Furthermore, bridging lenders will predominately look at the 90-180-day sale valuation, which is typically 70% of the market value.
So, although you may find a property with a £100,000 market value, the 90-180 sale value might be £70,000. Lenders would base their decision on how much to lend based on the £70,000 figure.
How Is Interest Paid?
Interest payments on bridging loans are usually settled when the loan is cleared; known in bridging circles as either ‘retained’ or ‘rolled-up’ interest.
The lender simply adds the interest onto the loan from the outset or accrues it and accepts payment for the interest when the loan is cleared.
Dealing with the interest payments in this manner has obvious cash flow benefits to the borrower.
There are 2 main types of bridging loans
Closed Bridge – A fixed date is set on when the bridge will be paid back. Usually a few weeks or some months. An example would be when a borrower has already sold their property and agreed a completion date. Upon completion, the funds would be used to repay the bridge.
Open Bridge – There is no fixed repayment date. The borrower takes out a bridge aiming to clear when an alternative form is secured, such as mortgage.
Open bridges are usually more expensive than closed bridges because they offer more flexibility. Regardless of whether you get a closed or open bridging loan it’s IMPERATIVE that you have a solid plan in place to pay the bridging loan back – this is called an exit route
If you unable to repay your loan back, then your home and/or other assets can be put at risk of repossession.
- A Form of Short Term Financing
- Mostly Used for Property Transactions
- Interest normally paid when loan is cleared
- Can Serve an Excellent Purpose
- Secured on Residential, Commercial or Land
- More Expensive Than Traditional Finance Options
- Should Only Use When Borrower Has Clear EXIT route
Bridging loans can be an invaluable form of financing as it allows the borrower, for example, to facilitate a property purchase that otherwise may not be possible.
Borrowers need to be aware that due to the short term, almost immediate nature of a bridging loans the interest rates can be significantly higher than more traditional form of finance.
Bridging is a secured form a lending as the loan is always secured on an asset such a residential and commercial property or land.
The growing popularity of bridging loans is testament how useful people and businesses find them. However, they should only ever be taken out when necessary.
Always make sure you have a clear exit route before taking out bridging finance.
Fees Associated with Bridging Loan?
There are several fees associated with bridging finance that you should be aware of –
Interest Payments on the Loan – Self-explanatory and how bridging lenders make money.
Interest rates vary depending on the deal but start at 0.6% per month and increase to 1.5% per month.
Arrangement Fee – Most lenders will charge an administration fee of between 1-2% to arrange the loan. The fee can be paid up front or added to the loan.
Exit Fee – An exit fee of 1% is normally charged when the bridge is exited.
Valuation Fee – A lender will normally insist upon a valuation survey from a RICS approved surveyor. The cost varies but is normally in the region of £500-£100. The borrower is liable for the survey fee.
Solicitors Fees – The borrower is normally liable for the lenders legal fees as well. The cost varies and are normally linked to the value of the property. The borrower is also responsible for their own legal fees as well.
Broker Fees – If you have come via a broker, such as ourselves, then the lender may add an additional broker fee. Although in most cases the broker is paid out of the arrangement fee.
Other Fees – There may be other fees such as indemnity insurance, valuation insurance, bank transfer fees but will vary on an individual basis.
To put this into content a client wanting to borrow £100,000 for 6 months may end paying the following charges:
- Loan Amount – £100,000
- Interest payments @ 1% per month – £6,000
- Arrangement fee @ 2 % – £2,000
- Exit Fee @ 1% – £1,000
- Valuation Fee – £500
- Lenders Legal Fees – £1,000
- Total Costs Associated with Loan – £10,500
It’s important you are aware with all the fees before taking out a bridging loan and the lender has a responsibility to make sure they are transparent with all fees.
- Professionals in the field of lending, commercial or personal loans
- As a broker we do the shopping around for you to find you not just the best deal, but the best loan suited for your needs
- Speed: time is money, and at Loanable we know it, you need your financing quickly as to not lose out on a good deal and savings
- No upfront fees or charges, period!
- No fees: just to remind you:)
- Quick and easy online application
- Your details are safe with us, we never, ever sell or exchange them…ever
Looking for a bridging loan, complete our easy online application today!
FAQs about Bridging Loans
What Is A Bridging Loan?
A bridging loan is an interest only, short term loan which provides a temporary financial ‘bridge’ to the borrower until a more permanent long term finance solution is secured. Almost always secured against an asset(normally property), loan terms can be anything from a few weeks to a couple of years. In the majority of instances, borrowers use bridging finance for a maximum of 12 months.
Who Can Apply for A Bridging Loan?
Any UK – based individual over the age 18 or UK – based company can apply. They will be required to demonstrate that they have sufficient equity in a security asset and that they have an “exit route” whereby they can satisfactorily account for how they intend to repay the loan and its interest.
How Much Can I Borrow?
Normally, the minimum amount available to borrow is £25,000. The maximum available amount depends on the security and LTV, but we have lenders who will provide multiple millions of pounds worth of funds.
What Is Loan to Value and how does a Lender Work Out How Much They Can Lend Against My Property Asset?
Loan to Value – or LTV as it’s more commonly known – is the % amount of money a lender is willing to lend relative to the equity value of the property asset. Importantly in bridging finance, a lender will base their LTV calculations on the 90 days forced sales value. So, while you may own outright a residential property worth £100,000, the 90 – day forced sale value may only be £60,000. A lender may then lend up to 70 % of the forced value which is equivalent to £42,000.
How Long Can I Borrow the Money For?
You can typically borrow the money for 1–12 months. Periods over 12 months are considered on a case-by -case basis.
What Type of Security Is Required?
Bridging loans are almost always secured on property assets. The exact type of property doesn’t matter: we have lenders who are happy to secure loans against residential and commercial property; against land; and against unusual property types. The most important factor is the equity available in the asset.
Can I Use a Property with An Existing Mortgage as Security?
Yes. Even if you have a property with an existing mortgage, lenders will consider your application providing you have enough equity in the property. We have lenders who, depending on the available equity, will work with 1st charge, 2nd and even 3rd charges.
Are there Age Restrictions on the Recipients of Bridging Loans?
Lenders typically have fewer age restrictions than with other types of loans and some do not have any maximum age limit for a customer they will be prepared to lend to.
What Is The 90 Day Forced Sale Value?
This is the value of your property asset should the worst happen and the lender have to push through a quick sale(usually at auction). Normally, the 90 – day forced sale value is 70 % of the market value(GDV) of the property. Gross Development Value(GDV) is what the property would fetch in normal market conditions.
Should you default on the loan, the lender will want to recoup their money as quickly as possible. The best way to do this if to offer your property at auction for a much lower value than its GDV – or usual market rate. Unsurprisingly, the lender is only interested in recouping their money and will do all they can to force a sale through quickly.
Is a Survey required on the Asset Being used as Security?
Yes, in most cases a basic survey will be required by a RICS – approved surveyor(Royal Institute of Chartered Surveyors) to determine the 90 – 180 – day sale value of the property. The survey is not as in – depth as a survey required for a mortgage and can be completed relatively quickly.
What Is an Exit Route and do I Need One to Get a Bridging Loan?
An exit route is the means by which you intend to pay the loan back. And yes, it is essential that you have a definite plan for how you plan to pay the bridging loan back. All lenders will want to know how you plan to do this before lending you the money. It’s extremely important that you have a solid plan to clear the bridging loan as failure to do so could result in the lender forcing the sale of your property. Always be sure you know your ‘exit route’ before taking out bridging finance.
Will A Lender Check My Credit File?
This is down to the discretion of the lender. Unregulated Lenders typically will not; regulated Lenders will. Also, solicitors can check on applicant’s credit profiles as part of the due diligence they perform during the bridging loan application process.
I have Poor Credit History. Can I Still Apply for a Bridging Loan?
Yes, even if you have poor credit you can still apply for a bridging loan. As mentioned, lenders are primarily interested in the value of the security being offered.
How Important are Employment and Affordability Criteria?
Lenders are primarily interested in 2 things: the value of the security being offered and the exit route. So, less attention is paid to employment and affordability criteria – which is not to say, however, that they bare no relevance.
What Is the Interest Rate on a Bridging Loan?
The interest rate will vary depending on your individual circumstances and specific application. Rates start at 0.55 % per month and go up to 1.5 % per month.
Can I Pay Off My Bridging Loan Early Without a Penalty?
Most lenders will allow you to do this. It’s important to check all paperwork carefully as the lender will have to clarify their position in respect of this in your loan agreement.
Why Might I Need a Bridging Loan?
Bridging loans are typically used by people and businesses who need quick, easy access to funds for a property purchase. Some property – related reasons for a bridging loan can be:
Closing a property deal quickly – Property developers may have sourced the majority of required funds but still need to bridge a gap to close a deal before they lose out to a competitor.
Property Auctions – Bridging finance is popular for people involved in property auctions as they must complete in 28 days. Traditional lenders, such as banks, find it difficult to work to such tight timescales.
Property Sellers – bridging finance allows the seller of a property to purchase a new property before they sell their existing one.
Purchase of an uninhabitable property – Mainstream lenders will shun lending on properties that do not meet minimum fit – out standards – i. e. having a kitchen, bathroom, central heating and running water. Bridging lenders are essentially interested in the equity value of the property, so are happy to lend on uninhabitable properties.
Property Renovation or Development – Bridging loans can provide the ideal short term financing for renovation or development.
Planning Permission – Sometimes a developer needs immediate access to capital in order to secure planning permission or further development funds.
While bridging finance is predominantly related to property, there are many reasons people seek an injection of cash more quickly than can be obtained through other loan products – and thus turn to a bridging loan. If the borrower has security to offer and a clear exit plan, then lenders will consider all circumstances.
How Long Does It Take to Complete a Bridging Loan Application ?
While the initial application only takes a few minutes, completing the necessary checks and paperwork usually takes between 1 and 2 weeks.
What Happens If I Cannot Pay My Bridging Loan Back at the End of The Term?
Having a solid exit route in place is a requirement for all bridging lenders. However, there are unfortunate circumstances where the borrower’s exit route does not materialise. Lenders will then work hard with the borrower to try and remedy the situation.
Should you be concerned that your exit route is no longer viable, it’s important that you keep in contact with the lender. Remember, lenders want to work with borrowers and avoid a default situation. If all options are exhausted, however, then the lender could put the borrower in a default position and force the sale of the borrower’s property.
Is Bridging Finance Regulated?
Bridging loans made to individuals are regulated by the Financial Conduct Authority. Bridging loans made to businesses are not regulated.
What is Chain Break Bridging?
This applies if you have found a property you want to buy and have agreed to sell your existing one. However, the buyer of your existing property subsequently becomes unable to pay you the agreed amount(usually, because the sale of their property has, in turn, fallen through) This creates a break in the chain. However, to prevent you from losing out on the purchase of your new property, a chain break bridging loan provides the funds needed to complete on your next purchase.
Can I re-pay my Bridging Loan through re-Mortgaging?
Yes. Since you would stand to free up equity in this process, it can be a way of re – paying your bridging loan.
What is a Capital Release Bridging Loan?
This is simply a way of describing a loan whereby you borrow against available equity in your property without intending to sell it. In such a case, it’s important that you have an exit route in place that doesn’t involve the said property being used as security. You will obviously need other assets to offer as security in lieu of this.
Can I Apply for a Bridging Loan to Buy a Rental Property?
Yes, bridging loan lenders routinely provide loans for this purpose.
Can I Apply for a Bridging Loan to carry out Renovations on a Buy-To-Let property?
Once again, yes, this is a popular reason to take out a bridging loan.
What is a “Speedy Purchase” Bridging Loan?
Bridging loans are, by their nature, supposed to be completed swiftly. However, there are lenders who can, in certain circumstances, release funds especially quickly to help an applicant complete a purchase. This can happen in as little of 5 days. However, that is very much dependent on the individual lender; your credentials; checks on the property being borrowed against and offered as collateral being concluded satisfactorily; and how quickly you complete the lender’s application procedures overall.
What is the difference between a First and Second Charge Bridging Loan?
This refers to two separate loan agreements. A first charge bridging loan is a loan that must be repaid, in full, to that particular loan provider before the second charge(the loan which was taken out second) is repaid.
As someone who has an existing Bridging Loan, how can I become eligible for a second one?
You will need to satisfy the lender that there is sufficient, remaining equity in your property or other assets to service the second loan; and also you will need to satisfy the lender that you have a sound exit route for the re – paying of the second loan.
Is it possible to have a Third Charge Bridging Loan?
It is possible to secure a third charge from some Lenders. However, at Loanable we always advise customers not to undertake repayment commitments they could find onerous, as defaulting can lead to the loss of your property. As mentioned elsewhere, you need an exit route which satisfactorily accounts for how you intend to repay your borrowings.
Is it possible to use a Property outside the United Kingdom as a Security Asset for a Bridging Loan?
Yes. There are lenders on our panel who will accept this.
Are Pension Funds and Trusts able to apply for a Bridging Loan?
While this is a more specialised area, we have lenders on our panel who will consider such entities.
Can I use a Bridging Loan to Expand or Invest in a Business?
Yes, there are bridging loan lenders who commonly provide loans for such purposes. As mentioned elsewhere, businesses fall within the realm of unregulated bridging loans.
I have been refused a Mortgage on a Property because it only has a Short Lease remaining. Can I apply for a Bridging Loan to pay for a re-negotiated, Extended Lease?
Yes, this is a fairly common reason to apply for a bridging loan.
I’ve been refused a Mortgage on a Property because it’s in a State of Disrepair. Can I apply for a Bridging Loan to complete the Purchase?
Yes, you can. This is a very common purpose that people seek bridging loans for.
Can I seek a Bridging Loan for a Property that’s used both Commercially and Residentially?
Yes, you can. This is known as a “semi – commercial” bridging loan and we have lenders who provide loans for these types of premises.
What are other types of Semi-Commercial Bridging Loans?
Broadly speaking, they are loans provided for buildings or units used for the mixed purposes of being both residential and commercial. In addition, semi – commercial or mixed – purpose loans can be sought when seeking to convert a commercial premises in to a residential one and vice versa.
Can I seek a Bridging Loan to secure a Partially-Completed Residential Development?
Yes, you can, although individual lenders may have various and differing stipulations related to – although not exclusively limited to – the results of the searches carried out on the development as part of the solicitor’s due diligence process.
Can a Bridging Loan be taken to acquire a Portfolio of Properties?
Yes it can – and this is a popular way in which they are used.
What factors affect the LTV (Loan to Value) made available to me?
Factors include, without being limited to, available equity in the security asset; the interest repayment option you choose; and whether you are seeking the bridging loan for a commercial, semi – commercial or residential property.
Can I use a Bridging Loan to repay a Tax Bill I owe to HMRC?
Yes, you can. You can also use a bridging loan for other HMRC liabilities such as VAT and Inheritance Tax.
I am seeking a Bridging Loan to buy a Property in Wales. As Security for the Loan, I want to use Equity I have in Properties in both Wales and England. Am I still eligible?
Yes, we can match you with brokers who will consider this. This is also known as “blended security”.
I’m awaiting Planning Consent to significantly modify a Residential Property. Can I still apply for a Bridging Loan?
Yes, subject to satisfying the security asset equity requirements of the lender; having an approved exit route; and the satisfactory conclusion of the solicitors’ searches, this is a recognised way of using a bridging loan.
Can I use a Bridging Loan to Re-Finance an existing Bridging Loan?
Yes, there are loan providers who will allow you to do this.
Can I use a Guest House or Hotel as a Security Asset for a Bridging Loan?
Providing all other criteria is met, then yes, these property types can be used as a security asset for a bridging loan providing the borrower has sufficient equity in them.
Can a Limited Company seek a Bridging Loan?
Yes, it is commonplace for many types of business to take out bridging loans.
Can a Bridging Loan be taken out in Joint Name?
Yes, multiple parties(of two or more) are able to take out joint bridging loans.
I am due to receive money from the Will of a deceased relative. Am I able to use a Bridging Loan as a stop-gap until I receive the Proceeds of the Will?
In theory, yes. However, a probate(a court – approved document which shows an inheritance in your favour) may be a necessary condition of the loan.
What is Distressed Value?
This refers to the value of a property that has typically been re – possessed and will be advertised for sale, frequently at auction, at a price significantly lower than its true market value.
Is there a difference in the Rate of Interest between Regulated Loans and Unregulated ones?
In general, the rates are similar. The differences, broadly speaking, lie in the fact that regulated loans adhere to a stricter criteria than unregulated ones when it comes to the releasing of funds.
Is it possible to Borrow 100 % of the Equity in my Property?
There are some lenders who advertise the availability of a 100 % bridging loan. However, they will always need additional security on top of the primary security asset. We advise careful consideration as to whether you are comfortable taking on that level of debt.
Can I use a Bridging Loan to Buy an Office or a Shop?
Yes, these would be commercial endeavours for which bridging loans are a popular source of providing finance.
I recently had my Property Valued. Can I submit this Valuation as my Bridging Loan Application Valuation?
Depending on the lender; on who conducted the valuation; and on how recent the valuation is, this may be possible.
Is it possible to Borrow for more than 1 year?
Yes, while a 1 year re – payment period is the commonplace maximum term, there are some lenders who will offer a 2 year re – payment period – or more in rare circumstances.
Can I take a Bridging Loan as a Second Charge against my Property?
Yes. This would mean that the first charge(most likely a mortgage provider) would have to be repaid in full in the event of a default before the second charge is addressed. However, providing you have sufficient equity – and other criteria is met – bridging loan providers will take a second charge position.
Is it possible to use something other than Property as a Security Asset for a Bridging Loan?
While equity in property is a pre – condition for the vast majority of bridging loan lenders, there are some who will accept personal or corporate guarantees as equity.
Is it possible to use Bridge Finance to secure an “Off - Plan” Property or Development?
Yes, bridging loans are often used to secure building land and “off – plan” sites providing other criteria is met and the borrower has a security asset with sufficient equity to warrant the loan.
What is the most common exit route?
The most common exit route to have in mind is a mortgage, most commonly from a high street lender.
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