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Bridging Loan Criteria

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 4, 2023

Fact Checked By:
David Nicholson - Finance Editor

What Is The Criteria To Get A Bridging Loan?

Applying for a bridging loan begins with understanding lenders’ expectations. These include bridging loan criteria and other requirements that will warrant quick approval of the bridging loan application.

A clear sense of a bridging loan, its uses, and how long you will need to pay it off is imperative before you choose a lender.

When you have the correct information, you can quickly proceed with the application.

In most cases, the fastest way to secure a bridging loan is through the help of experts such as Loan Corp which will connect you to the most competitive bridging lenders available.

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What Is A Bridging Loan?

A Bridging loan fills the gap between an immediate need for financing while waiting for incoming sales or income from another property which are not yet available.

It is also known as interim financing, gap financing, or a swing loan.

If you have a property currently on sale and need finance to refurbish other properties, a refurbishment loan is a suitable solution.

In that way, you sustain a place in the sale chain and minimize the long wait for a property sale.

It is a go-to finance solution for property developers, landlords, and other customers in need of short term property finance or mortgages. There are different types of loans which are open bridging finance and closed bridging finance that offers varying options for your loan requirements.

Features Of A Bridge Loan

  • It is a short-term financing option commonly used for property
  • It is a faster approval and funding process compared to traditional loans.
  • The interest payments are commonly imposed in a lump sum by the end of the loan.
  • Credit history checks are not as intensive as that for regular loans since the borrower puts up security. However, the lender still assesses the borrower’s credit history as part of their protocol.

We deal with the simplest and most complex bridging finance

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Bridging Loan Criteria for UK Clients

When it comes to applying for bridge loans, you can choose from 200 bridging loan providers in the UK to which we have access.

Each lender has its unique points regarding interest rates, loan sizes, costs, charges, fees and specific requirements. But they also share several lending criteria to assess if a borrower is qualified for bridging finance.

Eligibility And Location Criteria

The borrower must be a registered resident or private company (Partnerships, Limited, and Offshore) in the UK. Depending on the lender’s scope, bridging loans are available in London (+ Within M25), England, Scotland, Wales, and Northern Ireland. Others can extend within Europe or as far as the USA. We can help you secure international bridging finance if you are looking to access overseas bridging loans for both regulated and unregulated bridging finance.

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What Are The Loan Sizes I Can Take Out?

The minimum loan size for any borrower is £10,000. Some bridging lenders do not impose any upper limit. The maximum is £50,000,000 but some investment funds may offer more if required.

What Terms Are Required To Meet The Criteria?

Bridging loans are known as short-term financial solutions. As a result, repayment is intended to take place within a relatively short period. Terms of the bridge finance can range from 24 hours to 36 months. Most lenders design bridging loans for up to 18 months. Also, FCA regulations restrict regulated loans to up to 12 months.

Age And Proof Of Income

Bridging lenders often require borrowers to be aged 18 and above with a clear source of income. Some lenders have an age ceiling, but the minimum age is constant. In some cases, considerations are given concerning the age if there is a Power of Attorney involved.

On the other hand, some lenders do not require any proof of income, especially if the interest rates are imposed upon the clearance of the loan.

Security Criteria Required For The Lender

The borrower must have at least one financial asset or property that bridging loans can be secured against as a first or second charge.

The lender and the borrower will agree that the lender will assume ownership of the property upon failure to repay the entire amount or loan balance.

Security is the primary reason why it is relatively easier to get approved for bridging finance. Without security, you will struggle to get a bridging loan.

Here is a list of example properties that can be used as security:

  • Residential property (houses, flats, holiday homes, townhouses, duplexes, bungalows)
  • Commercial property (mixed-use properties, apartment complexes, restaurants, hotels, hospitals, offices, shops, pubs, parking spaces, grocery stores, gas stations)
  • Industrial property (warehouses, factories, research facilities, power plants)
  • Land (farms, ranches, orchards, timberland, development land)
  • Personal Assets (cars and other vehicles, jewellery, watches, artworks, antiques, gems)

Exit Strategy

Bridging loan providers oblige exit strategy, which details how the borrower will repay the bridging finance based on the agreed term.

Examples of exit strategies or payment plans include:

  • Sales from a property, shares, and other assets
  • Inheritance
  • Debt Collection
  • Refinancing
  • Property Transaction
  • Claims from a Maturing Policy
  • Or any anticipated income soon

Many lenders are keen on exit strategies and commonly make it a strong preference for approval. If you aim for fast and secure bridging loans, you need to have a well-defined repayment plan.

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Credit History – Do You Need A Good Credit Score?

Since bridging loans rely on security, lenders conduct credit checks to assess the interest rate that suits the paying practices of the borrower.

Most lenders are not too critical of the credit score of the customer. There are even bridging finance products intended to pay debts (CCJs, Defaults, Arrears, Bankruptcy).

Interest Payments

A common practice among lenders is to defer the interest to be paid in a lump sum at the end of the bridge loan term.

Others still offer monthly payment of interest or retain the interest for a specific period and pay it back when the loan is cleared.

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Purposes Of Bridging Loans

Bridging loans are traditionally associated with property. Over the years, the availability of bridging loans has expanded from landlords and property developers, for whom development loans are very popular.

Its purposes have expanded outside the traditional areas. Nonetheless, it remains an effective solution for immediate property finance.

Bridging finance can be classified as the following:

  • Personal Bridging Loans – Choose this bridging finance if you aim to buy a property while waiting for another to sell in the market.
  • Commercial Bridging Loans – This finance solution is designed for business needs such as property financing, land purchasing, cash flow solutions, tax compliance, and more.
  • Development Finance Loans – If you plan to build new properties or renovate old ones, this bridging finance is what you need.
  • Auction Finance Bridging Loans – Auction finance will allow you to pay for your auction purchases without inflated APR or fees.

Here are some typical reasons for taking out bridging loans:

Buying A New Property

The most popular use for a bridging loan is buying a new property while still selling another property.

Instead of waiting for the income of the previous property to purchase the new one, you can use a bridging loan to pay for your target property.

You can acquire a bridging loan as fast as a week. Thereby, it accelerates acquiring a new house, building, or land without incurring additional liabilities.

Read more: Bridging loan pros and cons

Property Refurbishment

When it comes to the mortgage application, the condition of the property is a crucial requirement.

Take, for example, a residential property without a proper bathroom or kitchen. More often than not, it will be deemed ineligible for a mortgage.

A common practice among developers is applying for a bridge loan to refurbish a property to increase its market appeal, commonly known as refurbishment loans in the bridging market.

Read our bridging refurbishment finance guide for more information on refurb loans.

Purchasing From An Auction

Acquiring a bargained property through an auction requires an existing fund of at least 10% of the bid as a deposit.

You can arrange the rest of the payment in less than a month. With this limited period, a bridging loan fits as it suits the timeframe of its availability for the borrower and the bid payment.

You can avail of Auction Finance to seal the deal within 14 to 28 days of your bid.

Mortgage Transfer

Planning to transfer to another residential property can be a hassle if funds from the sale of your last house are not yet available.

With bridging loans, the mortgages of the two houses can be rolled up together to provide about 80% of the combined loan-to-value (LTV) ratio.

When you finally sell the original property, you can pay back the loan before the due date.

Cash Flow Problems

If you’re running a business, it is not uncommon to experience a shortage in cash flow for a certain period.

Money problems could be due to late payments for invoices, immediate need for repairs and product acquisitions, and other operational factors.

When cash flow is temporarily slow, applying for a bridging loan is the quickest solution.

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Inheritance Tax

Before you can completely get your hands on a particular inheritance that goes above the threshold (£325,000), you will be required to pay a tax rate of 40%.

Some bridging loan providers offer short-term financing products specifically to pay fees and debts that require immediate payment.

Preventing Repossession

You can still redeem a property set for repossession by securing a bridging loan.

It is more beneficial to prevent repossession, upscale the property’s value, and sell it on your terms.

Some developers also go after these types of properties to increase their gains.

How does A Borrower Get Fast Approval For A Bridging Loan?

Bridging loans are comparatively faster and easier to apply for compared to traditional loans. But to get approved really fast, borrowers must ensure that they know the following:

Be Sure Of The Purpose Of The Loan And The Amount You Intend To Borrow.

Have a clear idea of how you’re going to use the loan along with the right loan size and how long you will take to pay it back. Lenders are interested in these details—the more specific, the better.

Determine The Value Of The Property You Will Use For Security.

Loan size can depend on the worth of the asset that you intend for security use. Before applying for a bridging loan, know the property’s value to get a precise estimate for your loan.

Know Your Mortgage And Home Equity.

You can get cheaper options on bridging loan products if you have these details beforehand. These are particularly essential if you want to bundle two mortgages together to purchase a new property.

Compare Bridging Loan Products.

Most lenders share the same loan criteria. But they could offer different interest rates depending on several factors.

Before applying, it is crucial to compare bridging loans and the corresponding loan rates that suit your condition. Check the website of your target lender and read the fine print.

Connect With Bridging Loan Experts

If you want a secure, reliable, and fast bridging loan, the best option is to work with brokers who have access to not only one but hundreds of lenders.

The Loan Corp has unfailing experience and expertise in bridging finance. You can skip the trouble of complicated applications and let them lead you towards the financial solution you need. Use our bridging loan calculator to get some accurate rates you can expect to pay.

Borrowers typically get a response within 24 hours of submitting a loan application. Upon approval, the release of the loan money can be within a week or two. Read our bridging loan example guide if you are looking for more information on how bridging works.

Contact Us Today To Meet The Criteria Required For Your Bridging Loan

When choosing the right bridging loan provider, there is also a specific list of standards that customers should consider, like fees, charges, LTV, terms, and bridging loan rates.

With over 200 bridging finance lenders in the UK, bridging finance products may vary along with specific requirements. Nonetheless, what matters most is the suitability of the product to your condition.

Loan Corp helps private individuals and companies find the bridging loan providers with the most competitive bridging finance products and cost-effective loan rates.

No case is too complex enough for our dedicated brokers and staff. We can even help you find bad credit bridging loans as long as there is enough security.

Our access to the leading lenders like HalifaxSantanderBarclays, and many others, make it easier for applications to be submitted, assessed, and approved. Get an online quote here for a bridging loan.

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