1 Stop Finance, work with bridging loan lenders that offer bridging loans anywhere in England, Scotland or Wales.
What can they be used for?
The most frequent use of a bridging loan is for the purchase of a property and or raising equity from an existing property that you may own. The most common uses are to purchase a residential property before your existing home is sold or have exchanged contracts. They are also used by property developers as property development finance. Because bridging finance starts at £50,0000 and most development loans start at £200k+ developers use bridging for their smaller loan requirements, where they are used to either buy or renovate a property which is then sold on for a profit, a lot of developers buy at auction where you need fast finance to secure the deal.
They can be secured against almost any type of property, including any type of commercial property apart for places of worship, residential and mixed residential with a small amount of commercial element, this should not take up more than 40% of the overall floor area of the property. Even if the property is in poor condition and uninhabitable, a bridging loan can still be used to purchase and then renovate before selling the property, lenders are really only interested in what the bricks and mortar value of the property is as it stands.
However, they are not just limited to this purpose. They can also be used for any sort of short term venture such as an auction purchase or a business cash injection. As long as an exit plan is in place, the possibilities are endless on what the loans can be used for.
How long do they last and how much can be borrowed?
Bridging finance is short term finance, meaning that it is most often taken out for one year or less. This can be extended all the way up to 2 years, but for longer terms, a different kind of finance would need to be used as 12 months with a possible 6-month extension would be normal practice. But that would be unusual the whole idea of a bridging loan is that it is a short term loan.
In regards to how much money can be borrowed, a loan amount can be from £50,000 or more with the maximum that can be borrowed only being determined by the properties value and the “loan-to-value ratio”, which is the percentage of the property value that can be borrowed. This is usually 70%-75% it is possible to get up to 100% of the properties value when using two properties to secure the loan against.
What is the interest rate for a bridging loan?
Due to the fact that bridging loans are short-term rates of interest tend to be higher than a traditional mortgage, currently, the best rate of interest is around 4% per month or 4.8% pa. Also bridging loans are only every quoted on a monthly basis and not with an APR rate. A Bridging Loan Calculator can be used to help you work out your monthly payments.
Also, Interest can be paid in two ways: rolled up or monthly. Rolled up interest is when the loan is paid as a lump sum at the end of the term instead of every month. This is frequently used when the loan will be paid off from the proceeds of a sale that hasn’t happened yet. Or you have another source of funds that you will be using to pay off the loan.
How much is a bridging loan valuation?
Before you instruct your solicitors the lender would ask you to instruct a surveyor to carry out a valuation of the property you intend to purchase or release equity from. This valuation can vary in price from as little as £200 up £1,000+ it all depends on the amount of work the surveyor is required to do a simple desktop valuation is where the surveyor will simply go through Zoopla or Rightmove checking out what has sold in the area and the prices achieved, in comparison a full valuation would include a desktop, a site visit, a comprehensive surveyors report running too many pages including property condition what the local market is like etc.
How long does it take for funds to be received?
Funds can be released in as little as 48 hours if all the paperwork is completed quickly. This is certainly a best case scenario but to get a completion in under a week is commonly possible.
The average completion time is 4 weeks for all our cases. If completion is needed in a very short timeframe, then you must ensure that you have all necessary paperwork and information ready at the time of your application, we will make sure that the application goes as smoothly as possible by helping with any form filling and being on hand 24/7 to deal with any issues that may arise during the loan application stages.
What are first and second charge loans?
A first charge is the name of the first loan that is secured on a property it would typically be the mortgage on your property.
When a bridging loan is taken as a second charge, this means that it is the second loan to be secured on a property. It is riskier for a lender to place a second charge on a property so a higher interest rate may be expected. Depending what your intentions are you could also repay the first charge and take out the bridging finance as a first charge, we would advise you on the best way to arrange this.
What is the exit strategy?
The exit strategy is the method in which the loan is going to be cleared by the borrower in full. The exit strategy can take various forms, such as savings you can release at some time in the future or the sale of a property, or any other source of income that you are likely to come into in the future that will be used to pay down the bridging loan.
If no exit date is given for the payment of the loan, this is referred to as an open bridging loan. This happens when the exit strategy is from a sale yet to happen, for example. If the loan is set to be repaid on a certain date, this is called a closed bridging loan.
What costs do bridging loans come with?
Besides the interest rate, there frequently are arrangement fees and administration fees. These all vary depending on things such as the amount being borrowed and the lender who is giving you the loan. Usually Bridging lenders only charge an arrangement fee this would vary from lender to lender but you can expect anything from 1-2% of the agreed loan amount.
Can the loan be paid before the end of the term?
Typically loans can be paid off before the end of the term with no fees or penalties. The interest rate paid would be based on the month the loan is paid off. You can also usually make part payments on the loan without incurring any penalties; this would have to be in round amounts of say £20k-£100k you would have to clear this with the bridging lender before making a payment.
Does a poor credit history affect my chances of getting a bridging loan?
As the security of a bridging loan is on a property, a poor credit history usually doesn’t affect your chances at all. Most lenders would be more than happy to lend to people with a poor credit history, including missed credit card payments, mortgage defaults, CCJS or any other kind of default.
Not all bridging loans are authorised and regulated by the FCA as a rule of thumb if you live in the property or intend to live in the property, or it is your current home, it would be considered an fca regulated loan
If you have any other questions or would like to discuss with our team about your situation, please ensure to contact us.
Specialists in securing Bridging Loans
Up to 100% of the property value
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Rates from 0.37% per month
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