Bridge Loan Lenders in the UK – Who is best for your bridging finance requirements?
Purchasing a home is a massive investment that very few people are able to make outright. Banks are well aware of this, which is why they offer a variety of different property finance products.
The most common loan people take out when they want to purchase a property is a mortgage, but in some cases, you may need some extra help to afford the deposit. This is when bridging loans come into play, so we’ll be discussing them in more detail in this piece.
If you want some more financial advice on the types of loans you’ll be able to take out, then you should contact us at Loan Corp. We can provide you with expert financial advice that can help you secure a loan for almost any purpose.
We have access to over 200 UK bridging loan lenders, start your application online below now:
Bridging Loan Lenders
Bridging Loans Explained
Bridging loans are designed to help consumers with a sum of money that can help them with a prospective debt when time is a factor.
They are most commonly used when a borrower has not sold their own home yet but needs to secure capital for a deposit on a new home. The interest rates of bridging loans are usually quite high, as they can be arranged much quicker than mortgages and are also paid back much sooner.
Property developers also make use of these loans if they work under tight deadlines, as this will help them secure a loan sooner.
For a lender to approve you for a bridging loan, you will need to prove that you will be able to pay it back within the term. Proving this may entail giving the lender proof that once the sale of your home goes through, you will use that capital to settle your bridging loan.
You will also be subject to a few different eligibility checks, but we’ll go through those in more detail later on.
How do bridging loans work?
A bridge loan is often offered on an interest-only basis. This means that you won’t have to make any repayments on the capital you owe until the end of your term.
However, lenders also make the interest rates on bridging loans much higher as a result. This allows them to still make a profit from bridging loans despite them being short-term.
Bridging finance is normally secured against the property you own or another high-value asset. Many lenders don’t require you to make monthly repayments on a bridging loan, so you’ll repay both the interest and capital at the end of your term.
If you have an existing mortgage on your old home, then it will be a second-charge bridging loan, as your first mortgage lender will receive the capital if your home needs to be sold.
How long do bridging loans take to arrange with most lenders?
If your situation is uncomplicated, then you could receive a conditional offer within a few days from the lender that your bridging loan broker has chosen.
Bridging finance is usually much quicker to secure, but the decision to provide you with a loan will depend on how viable your exit strategy is. This regards your ability to pay back your loan at the end of the term.
How To Secure A Bridging Loan
If you are interested in securing bridge finance, then there are steps you should follow to ensure your success:
1. Have your exit strategy ready
If you are in the process of selling your home, having proof of this will strengthen your case significantly. This is why you should keep your agreement in principle and other paperwork on hand if you’re planning on seeing a broker.
2. Consult with a broker
Finding a bridging loan lender will not be difficult, but if you want to get the best deal possible, you should consult with a bridging finance broker. They can provide you with professional advice, help you through the application process, and give you a list of bridging lenders with the best offers.
3. Submit your application
If you’ve decided to use a broker, they should help you with this step. Brokers will often offer you bespoke advice and make sure that your paperwork is all in order before you send it off.
Benefits Of Bridging Loans
While bridging loans might have high-interest rates, there are some instances when they will be the best option for you. Below we list and discuss some of these instances:
- If you want to renovate a property that has been declared uninhabitable: Mortgage lenders will not provide you with a mortgage on a property that has been declared uninhabitable. Bridge loans can provide you with enough money to bring the property back up to code, so you can secure a mortgage. In this case, your exit strategy would be the sale or remortgage of the property.
- If you want to purchase a property at auction: If you’re buying property at auction, you will need to pay the deposit on the day of the auction and the full amount within 28 days. Securing a mortgage can sometimes take longer than this, so bridging finance can hold you over until you are approved for one. Your exit strategy would be your mortgage or the sale of the property.
- You are declined for a mortgage due to bad credit: If you have a poor credit rating but know that your credit issues will soon be resolved, you can use a bridging loan to secure a property purchase. Once your credit issues have been resolved, you can switch over to a mortgage. This will also serve as your exit strategy.
- You want to borrow against your property’s increased value after renovations: If you have been turned down for a secured loan to help renovate your property, then a bridging loan will be an option available to you. A bridge loan will provide you with the funds you need for the revamp, and your exit strategy would be to remortgage on the new value of the property.
What Are The Eligibility Criteria For A Bridging Loan?
While it is easier to be approved for a bridging loan than a mortgage, there are still some eligibility criteria that will apply. We discuss how these factors could affect your ability to receive a bridge loan.
If you’re trying to get a loan of any kind, then a good credit rating will always be very beneficial. Lenders are far more interested in dealing with consumers that have good track records of paying back loans. This is why they often offer better rates to customers with good credit.
There are still lenders out there that can provide you with a bridging loan if you have bad credit, albeit at a higher interest rate. Bad credit will only be an issue if it puts your exit strategy in jeopardy. An example of this will be if your exit strategy is remortgaging, as mortgage lenders won’t provide you with another loan if you have poor credit.
Desirable security property
If your exit strategy is linked to the sale of the property you want a loan for, then loaning against a desirable property will be beneficial.
This is because lenders want to know that they will be able to get their money back if you default on your payments and they have to resell the property. The “desirability” of your property will be determined by the lender looking at factors like the area and building type.
Having limited or no property experience will not discount you from receiving a bridging loan, but lenders prefer to deal with experienced customers. A proven track record of purchasing property will give you access to better deals and interest rates.
This is why many lenders will ask for proof of other properties you have successfully secured a mortgage for and purchased.
Most bridging loans offer a 70 to 75% loan-to-value ratio, but putting down a larger deposit will give you access to better deals. Lenders view large deposits as a good indication that you will repay your loan.
Viable exit strategy
If you don’t have a viable exit strategy, you likely won’t qualify for a bridging loan. A good exit strategy is the most important part of applying for bridging finance, so the stronger it is, the more likely you are to receive good rates.
The best exit strategies usually involve a sale or remortgage, so you’ll need to provide proof that one of these options will be viable for you. An offer from a buyer or an agreement in principle for a remortgage will serve as evidence in these cases.
If you are after development finance, then the lender will want proof that you have the means to complete the renovations on your property. They will also want to ensure that the work will raise the required capital at the end of your term.
Which UK Banks Offer Bridging Loans?
There are many lenders in the UK that offer bridging finance. However, very few mainstream banks offer them, so you will have to peruse the large market of specialist bridging loan providers.
Some of the best bridging loan providers in the UK include:
- Lloyds Bank
- Oblix Capital
- Greenfield Capital
- Precise Mortgages
Regulated And Unregulated Bridging Loans
Regulated bridging loans
If you are in need of funds for a property that you are already living in or planning to live in, then a regulated bridging loan will be for you.
These loans are overseen by the Financial Conduct Authority to protect consumers from mis-selling and poor financial advice.
Unregulated bridging loans
Unregulated bridging loans are not subjected to the same rules, so lenders have more leeway with who they can lend to and on what terms.
These loans aren’t as unsafe as their name might suggest. They are just slightly more flexible to accommodate more borrowers.
An example of an unregulated bridging loan would be an unregulated lender allowing you to borrow money against the rental income you expect to receive if you are after a buy-to-let property.
How Much Can I Borrow With A Bridging Loan?
Bridge loan providers don’t often impose lending limits. If you’re able to convince these lenders that you have a viable exit strategy, they should provide you with the amount you need. This exit strategy must be able to cover the bridging loan cost, though, so keep this in mind.
Some lenders may reject your bridge loan application if you ask to borrow too little. These deals may not be worth the lender’s time, as they won’t make all that much back in interest.
This limit will differ from lender to lender, but some of them will turn you down if you are looking to borrow less than £50,000.
Bridging Loan FAQs
Do UK banks provide bridging loans?
While many high-street banks still offer bridging loans, they don’t actively advertise this fact. This is owing to many banks preferring traditional finance options like mortgages.
Therefore, the best way to see if a bank will offer you a bridging loan is by contacting it.
Will I need proof of income for a bridging loan?
Many lenders do not require proof of income, as there aren’t any monthly payments attached to bridging loans. You will need to meet the rest of the eligibility criteria, though.
What are the alternatives to a bridging loan?
If you aren’t interested in a bridging loan but still want finance in a similar way, then there are some options available.
Asset refinancing and invoice finance can be arranged very quickly and can act as a cheaper alternative to a bridging loan.
If you’re in need of some finance in the form of a bridging loan, then you should contact us at Loan Corp. We can provide you with expert financial advice and help you compare bridging loans in no time at all.
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