Bridging Loans Made Easy
What is a Bridging Loan?
This is a loan that is usually taken out to solve a temporary cash shortfall that may arise when buying a property or business, or perhaps paying for a renovation.
A typical example of when you may need one would be if you want to buy a second property before you’ve sold your first.
Or you may need one if you’re buying property at auction
As they are more risky for the lender than the usual housebuyer’s loan, bridging loans are more expensive and should only be used where you are fairly certain to repay them within about 6 months.
Depending on the lender, a Bridging Loan can be obtained by the self employed or people with bad credit. In other words to those who traditionally have found it more difficult to get loans and mortgages.
How they Work
In the case of buying property, a Bridging Loan is normally secured by getting a mortgage on the new property, and taking out a second mortgage on the property being sold.
In this case the loan will depend on a positive valuation of the relevant properties.
Lenders will usually allow Bridging Loans of up to 65% of the value of the properties – less any existing mortgage. But this will depend on the lender so you can shop around for better deals.
You can usually borrow between £25,000 to £500,000 as standard.
Larger loans are possible but may take slightly longer to arrange.
The Process of Getting a Bridging Loan
Here’s how our partners operate (ie the lenders we will connect you to if you apply from here
Your application is emailed direct to our partners.
They will respond to you within an hour (on a normal working day ie between 9 am to 5.30 pm Monday to Friday) with an offer in principle.
If you agree to their offer in principle, the lender will arrange for an urgent valuation of the property the loan is to be secured against.
Once they have recieved your payment for this valuation it will take a maximum of 72 hours.
The cost of the valuation will vary but an average would be £200. To speed up payment you would be able to deposit the funds in a High St bank.
Meanwhile you need to get your solicitor or conveyancer to move very quickly on all the usual conveyancing tasks ie the local authority search, checking the deeds of the new property and so on.
(You can read more about this in the conveyancing section where there’s also information on a very efficient conveyancing service).
You should expect the entire process to take 7 to 10 days – ie from your first application to the money being paid over to you.
It could be done quicker. It depends on how fast you want to move and if there aren’t any significant hiccups.
You will normally be charged a set interest rate, which is usually referred to in terms of a percentage per month.
For example; say you borrow £100,000 at 1.5% per month, the loan will cost you £1,500 per month (ie 1.5% of £100,000 for each month).
In theory you want to shop around for the best rate. But in practice most people simply use the lender that can act quickest because time is usually of the essence when a this type of loan is required.
Please note: If you’ve got a bad credit history you can expect to pay more.
Bridging Loans for Auctions
If you buy a property at auction, either for your own occupation or as an investment you have to complete within 28 days.
You could use a specialist bridging lender, whose main business is to cater for auction purchases.
These lenders are normally “non-status” (ie they make no enquiries of the financial standing of the borrower), and have no minimum periods or redemption penalties.
Where To Get a Bridging Loan
You may be able to obtain one from a normal bank, or alternatively, from a specialist bridging lender.
The latter may well be preferable. Unlike most banks, they’re geared to deal very quickly with your request – which is probably fairly urgent.
They can normally come up with the money within a few days of your application. The average would be a week or so – depending on how speedy the conveyancing has been done by your solicitor or conveyancing agent.
However it could all be done in only be a couple of days.
If you need a Bridging Loan now we can put you in contact with a specialist who we’ve found produces the best deal in the fastest time.
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