A quick overview of Bridging Loans
Securing long-term finance like a mortgage can be time-consuming, but a bridging loan could help when speed is of the essence. They have higher interest rates and shorter terms than standard mortgages, but if you’re in a hurry to buy a property or break a chain, they could be just what you need. You can find out more in our guide to bridging loans.
How do bridging loans differ from mortgages?
Bridging loans are a short-term solution designed to bridge a gap in funding, for example, to buy while waiting for your mortgage to complete. The main benefit of using them is their speed, so they are typically used for purchases through an auction, or to fund a refurbishment prior to transferring onto a mortgage. Here are the main differences:
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Speed of funding: Funds can be released in days or weeks, rather than months
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Interest structure: Interest is typically calculated monthly rather than annually
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Repayment: There are no monthly capital repayments; the loan is repaid in a lump sum. This means you need an exit strategy, for example, selling the property or refinancing to a standard mortgage
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Focus on the asset: Lenders are more concerned with the property value and exit strategy than your income
Deposit requirements for different uses
Bridging loans tend to be bespoke to the individual deal, so the deposit requirement will vary quite a lot. However, you’ll usually need a larger deposit than for a standard mortgage, and this requirement is likely to rise if the property is commercial or requires heavy refurbishment.
|
Bridging Scenario |
Approx Max LTV (Loan to Value) |
|
Standard residential purchase |
Up to 75% |
|
Auction purchase |
Up to 75% |
|
Light refurbishment |
Up to 70-75% |
|
Heavy refurbishment |
Up to 65-70% |
|
Commercial property |
Up to 60-65% |
|
Land (with planning) |
Up to 50% |
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FAQs
Typically, a bridging loan can be arranged in 5 to 21 days, which is significantly faster than a standard mortgage. However, with a specialist broker and a straightforward application, it is sometimes possible to secure funds within 48-72 hours in some cases.
Speak to a bridging finance specialist today
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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