Bridging Loans

We can help you to get the right Bridging Loan.

We don’t charge any fees upfront.

Find out how much you could borrow today!

Call or WhatsApp us 07966259069

What are bridging loans?

Bridging loans are a way to borrow money in the short term. They can be used to ‘bridge the gap’ if you need to buy one property before selling another. Unlike mortgages, bridging loans can be arranged quickly if speed is important.

Here are some examples of when you may consider using a bridging loan:

You are in a property chain that has collapsed and you don’t want to lose your dream home.
You are buying an auction property and need to raise funds quickly.
When buying a property that is unmortgageable. Your plan is to make it habitable or lettable so a traditional mortgage can be arranged.

Bridging loans are a secured loan, meaning that you have to secure an asset against them, usually a property or properties. As there is a risk of losing your asset, bridging loans are sometimes known as the loan of last resort.

How do bridging loans work?

You can borrow between £50,000 and £10 million with a bridging loan. The amount depends on how much equity you have available. The maximum loan, including interest, is normally limited to 75% loan to value. The loan is then secured on the property or it can be across multiple properties to raise the required funds. A bridging loan, unlike a mortgage, is not directly linked to your income.

The bridging loan is repaid either by the sale of the property or by raising finance through a traditional mortgage route.

What are the pros and cons of a bridging loan?

Make sure you balance up the pros and cons before you apply for a bridging loan.

Pros of bridging loans

You can quickly borrow the money to keep your property transaction on track.
It is possible to borrow very large sums of money.
The repayment terms can be flexible to fit in with your plans.
It is possible to secure lending on properties where high street lenders may not.

Cons of bridging loans

Bridging loans are a secured form of borrowing, so you’ll need to put up an asset against the loan. This means you risk losing that asset, for example a property, if you can’t repay the bridging loan.
You pay for the convenience of fast, flexible finance with a higher interest rate.
Bridging loans can come with a range of fees that add to their expense.

Bridging loan interest rates

Interest rates tend to be higher on bridging loans as you are paying for the privilege of borrowing a lot of money quickly. Because bridging loans tend to be short term, interest is charged daily rather than annually. You can expect to pay anything from 6%APR up to 20%APR depending on the loan. This is far higher than the mortgage interest you will pay with the best mortgage deals on the market now.

Unlike a traditional mortgage there are 3 ways that the interest on a bridging loan is charged;

Monthly – Similar to an interest-only mortgage where you pay the interest payments each month and they are not added to the loan.
Rolled up – Interest payments are added to the loan and paid when the bridging loan is cleared.
Retained – You borrow the interest upfront for an agreed period and then when the loan is paid back, any unused interest is returned to you.

Cost of bridging loans

Alongside the interest rate, there are other bridging loan fees you may have to pay. These include:

Arrangement fee paid to the lender – typically 2% of the loan and added to the loan.
Administration fee – can be payable upfront.
Legal fees – part payable upfront to your conveyancing solicitor and the rest on completion.
Valuation fees – range from £900 – £2000 depending on the lender and how fast you need the funds.
Broker fees – payable on receipt of the mortgage offer – from £500 flat fee to a % of the loan.

How do I get a bridging loan?

You can apply to a specialised broker or direct to the lender for a bridging loan. There are several things lenders will assess when deciding whether or not to approve your application.

The lender will usually require at least one property to be used as security against the loan. This will likely need to be another property to the one you are selling, so you may need to own more than one property to secure a bridging loan.

The lender will also want your exit plan. That is how you will repay the loan and by when. If you need to take out a traditional residential or buy-to-let mortgage, for instance on the property that has been renovated or the property you are buying, you will need to show the lender proof that the mortgage will be forthcoming. They will undertake affordability checks as standard with normal mortgage lending or look at the rental income you will be generating. This is to satisfy the lender that you will be able to secure a mortgage and you can afford any repayments required on the new loan.