100% Bridging Loans guide in the UK
Usually, the highest rate of loan to value on a bridging loan is 75% to 80%. However, in certain situations, you may need a bridging loan with a loan to value of 100%.
Fortunately, there are many lenders that offer 100% LTV bridging loans. As long as you have a good exit strategy and the right assets, you should be approved for one of these loans.
At Loan Corp, we can get your loan approved within 24 hours.
This guide will take you through everything you need to know about 100% bridging loans. We’ll look at how they work, how to get one, and much more.
100% Bridging Loans Explained
100% bridging loans, or bridge loans, are short-term loans that match the property value of the property you’re purchasing. They’re also known as 100% LTV bridging loans. LTV stands for loan to value.
Most bridging lenders offer loans of 75% LTV. This means that 100% bridging loans can often be hard to find.
The loan-to-value percentage represents the portion of the property value that’s covered by the loan. For example, if you took out a 75% LTV loan, then you would own 25%, and the bridging lender would own 75%.
However, with a 100% LTV bridging loan, the debt you owe to the lender is the same as the property value.
This might not seem like the most comfortable position to be in. Still, this type of bridging finance allows you to borrow 100% of the purchase price of a property. This means that you can buy a property without having to use any of your own money.
This gives you the freedom to purchase property without your cash flow being impacted.
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How Do 100% Bridging Loans Work?
A bridging lender would be too exposed if they lent you 100% of the property value of any single property. In order to secure a loan, you need to have another property that you can include in the loan. This is because bridging loans are secured loans.
This will improve the overall risk position for the lender and enhance the security position. However, the property you include needs to have a sufficient amount of equity in it to be able to work.
Let’s take a look at an example of how a 100% LTV bridging loan might work in practice.
Let’s say you’re planning to buy a house at auction in order to refurbish it and sell it. If it costs £200,000, then you’ll need to pay a cash deposit of £50,000.
Instead, you could use your own home as security in a 100% bridging loan. You can then buy the house at auction without the cash deposit. So, you’ll have purchased the property without using your own money.
All bridge loans are short-term, including 100% loans. They usually need to be repaid within 3 to 24 months. Bridging lenders expect you to pay back all of the money you owe plus any interest you’ve accrued. A bridging loan is a secured loan, so failure to repay it could mean you risk losing your home.
Due to this, lenders make sure you have an appropriate exit strategy in place. This usually involves refinancing into a long-term mortgage or selling the property for a higher market value.
It’s rare for interest payments to be made monthly on bridging finance loans. Usually, you pay all of the interest at the end of the loan.
You can include multiple properties as security for the loan. This may reduce the interest rate of the loan and increase the value of the loan available to you.
What Do I Need To Get A 100% Bridging Loan?
All bridging lenders want to lend you money, but they need to be careful with the number of risks they take. This means you need to have another property to include in the loan, or it’s not likely you’ll be lent 100% of the funding.
Here’s what you’ll need for a 100% bridging loan:
- An exit strategy: a bridging lender will make sure that you have a good exit strategy in place before they approve your loan.
- Proper security: the equity you have in other properties must cover the extra 25% needed for the loan. Lenders won’t go above 75% loan-to-value on any single property.
- A bridging finance broker: most lenders that offer 100% LTV bridging loans prefer to go through a bridging finance broker. Using the right bridging loan expert will give you access to the very best deals on the market.
- Loan Corp works with over 200 lenders in the UK and can get your loan approved within just 24 hours.
Who’s Eligible For A 100% Bridging Loan?
The eligibility criteria for 100% bridging loans varies between lenders. Generally, applications are considered on a case-by-case basis. Still, there are a number of criteria that most lenders will look for:
- Property value: during the application process, the lender will assess how much your property could sell for. They’ll also determine how quickly they could sell it if you can’t repay your loan.
- Exit strategy: a bridging loan lender will closely examine your plans to repay the loan and any interest. As it’s a short-term loan, they’ll be looking to make sure that your plan is a strong one.
- Credit profile: as long as your property and exit strategy are adequate, then your credit history won’t be too important. Any slight issues with this will usually be overlooked by the lender.
Should I Get A Regulated Bridging Loan?
One thing you’ll need to discuss with your lender is whether they’ll be giving you an unregulated bridging loan or a regulated one. Many lenders only offer regulated loans. So, if you’re looking for an unregulated one, you’ll need to check if they provide them.
A bridging loan is classed as unregulated or regulated based on the way in which your property will be used once the loan is granted.
Unregulated bridging loan
Unregulated bridging loans aren’t connected to your main residence. They could be loans used to buy things like land, commercial property, investment property, or for making investments.
Regulated bridging loan
Bridging loans are classed as regulated if the property used to secure the loan is your main residence. This is also the case if the secured property will become your main residence or is the main residence of your close family.
Things To Consider Before Taking Out A 100% LTV Bridging Loan
As with all loans, there are a number of things to consider before you decide to take out a 100% bridging loan. However, although it’s helpful to receive 100% of the funding you need, it does come with some risks.
The property or any other assets used to secure your loan can be repossessed if you fail to repay it. This is also the case if you’re unable to pay it off within the designated period of time.
Bridging loans also tend to have higher interest rates than other types of loans. Generally, the rates start at around 0.39% a month. They can sometimes be as high as 1.5%. However, the rates will vary depending on the lender.
100% loans are usually at the higher end of the interest rate scale.
Another thing to consider is that it’s very hard to get a good 100% bridging loan on your own. To get a good deal, you’ll need to work with a broker who will present your case to bridging lenders for you.
Steps To Take Before Taking Out A 100% Bridging Loan
- Use a bridging loan calculator to work out what the repayments on your loan would be. Make sure that you’d be able to make these payments.
- Decide what collateral you’d be able to use to secure your loan. Remember, this is instead of a cash deposit. Consider whether you could afford to lose this asset if you failed to repay the loan.
- Have an exit strategy in place. This could be refurbishing and selling the property for a profit. Or, it could be to refinance onto a residential mortgage.
- Work with a bridging loan broker. A broker will be able to tell you if the asset you’re using for security is enough. They’ll also help you to put your application together. Usually, if you do this on your own, the lender will reject your application.
- Once the broker has helped you build an application they’ll then contact a bridging finance lender. They’ll then submit your application to them for approval. There will be lots of information included in the application.
- This includes proof of your exit strategy. It also includes income information, a property valuation report, and credit reports. If you’re planning to refurbish the property, then there will also be proof that you know how to do this.
- Finally, you’ll be approved for your 100% bridging loan. How long it takes depends on the lender and your individual circumstances. However, bridging loans are short-term loans, and you shouldn’t have to wait long to get approval.
How Loan Corp Can Help You
Loan Corp works with over 200 bridging loan lenders in the UK. We can get your loan approved within 24 hours, and you’ll often receive your funding within just 1 week. The lenders we work with offer loans with both short-term and long-term repayment plans.
We’ll guide you through your application and get you the loan you need quickly.
Can I get a 100% bridging loan from a bank?
Although it’s possible, it’s very difficult to get any type of bridging loan from a high street bank. The easiest way to secure a 100% bridging loan is to go through a broker. They will contact lenders for you and get your loan approved quickly.
If you do want to apply for a bridging loan through a bank, then you should still do this through a broker. However, if you have a poor credit history, it’ll be difficult to get approval for a bridge loan from a bank. If this is the case, it’s definitely best to go through a lender.
Do I need a good credit score to get a 100% bridging loan?
A 100% LTV bridging loan is based on the value of your asset, and so many lenders won’t run credit checks. If they do, they’ll usually overlook poor credit ratings. As long as your credit history doesn’t affect your exit strategy, it will usually be overlooked by lenders.
Some of the common issues that lenders overlook include:
- Missed mortgage payments
- Late payments
- Low credit scores
- No credit history
- Payment defaults
- Debt management schemes
- Payday loans
What are the alternatives to bridging loans?
Bridging loans are the fastest way to get funds in certain situations. However, the repayment terms are short, and the interest rates are high. One alternative is to take out a home equity loan. This means that you can borrow against the equity in your own home.
The repayment terms for these loans are usually between 5 to 20 years. The interest rates are also lower than bridge loans.
So, as long as you have the right collateral and a good exit strategy, you’ll be able to secure a 100% bridging loan. This eliminates the need for any cash deposits and allows you to start investing in your future.
It’s very hard to secure one of these loans by yourself, and you should always work with a bridging loan broker. They’ll help to get your loan approved quickly by a lender. This will remove a lot of the stress involved and allow you to focus on what’s important.
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