Bridging Loan Hub – When Would You Use Us?
Scenario 1: Moving Home
The individual has not sold their home yet but is desperate to complete on a new property or they risk losing it. A bridging loan allows them to get the money they need to complete on the property and then they can repay the loan when their house eventually sells. For extra security, see guarantor loans.
Bridging Loan Example: Your house is worth £200,000 and you have an outstanding mortgage of £100,000, you want to move to a £400,000 and do so quickly. But you won’t be able to get a mortgage in just a few weeks or sell your existing home. So you get bridging finance to cover the gap, allowing you to move in quickly and clear your debts when your original house is sold.
Scenario 2: Property Developer
A small or large property developer sees an individual property or block of flats that they want to refurbish and sell at a higher price. Rather than go through a long mortgage process, they can borrow a few hundred thousand or million pounds, receive the money within a few days or weeks and complete very quickly. Several months or years later, the property has been renovated and has now gone up in value, they can sell the estate, allowing them to repay their loan and make a profit. This type of finance is particularly popular for buy to let property developers.
Scenario 3: Raising Finance
If you have an existing bridging loan or mortgage, known as a ‘first charge,’ any equity left over can be used for another loan, known as a ‘second charge.’ This can be used to raise finance for an investment opportunity such as putting money into a business or another property.
Bridging Loan Hub can facilitate finance for agricultural land, bungalows, chalets, converted barns, cottages, detached homes, farmhouses, hotels, maisonettes, mid-terraced homes, offices, petrol garages, semi-detached homes, studio flats, terraces, townhouses and warehouses.
We proudly offer bridging loans in London, Birmingham, Manchester, South-East England, Wales, Scotland and practically every other area of the UK upon request. We sadly cannot facilitate loans in Ireland.
What Checks Are Carried Out?
Your Plans: Bridging lenders like to see plans for your project including costings, development work to carry out and potential value.
Security: You must have some form of security to be eligible and this is usually your property, either residential or commercial. Highly LTVs will be available for those applying for a first charge mortgage compared to a second mortgage which is likely to be slightly less.
Credit Checks: Some lenders we feature rely on credit checking as part of the application process, however, there are non status lenders that we work with that do not. Instead, they look at other factors, especially the value of the property in question and its potential.
Valuation: A RICS surveyor must be instructed to give an accurate valuation of the building. This typically costs no more than £1,000 (the bigger the property, the more expensive usually). Some lenders will incorporate this fee into the final loan sum.
Solicitors: Finally, both your solicitor and the loan providers will carry out final checks to ensure that the bridging loan can go ahead.
How Do Repayments Work For Bridging Loans?
Loan terms are typically up to 12 months for regulated lenders and up to 24 months for non-regulated bridging lenders. There are different repayment options available to you which may be better suited depending on your project or situation.
Standard Monthly Repayments – This involves paying equal monthly repayments on a scheduled date each month, so you know exactly how much you can budget for each month. The repayment is a combination of interest and capital. The interest refers to the fees charged by the lender (0.5% – 2.0%) and the capital is the amount you have borrowed (up to £25 million). Although the repayment amount each month does not charge, you start by paying more interest of the loan and then eventually this is paid off and you are only paying the capital. This is how a mortgage repayment works and gives you the option to make overpayments of interest, which will help you save long-term. Read more here.
Rolling Interest Option (most popular) – Here, you are saving the interest right until the end of the loan term. This allows you to make lower monthly repayments as you are only paying the capital each month and the interest is rolled up or compounded until the loan’s redemption.
Interest Deducted – You only pay the capital on your loan each month and because you are taking away the interest, this is now taken away from your loan drawdown (amount you can borrow). So if you are looking to borrow £100,000 over 12 months at 1% interest, you would pay £12,000 worth of interest over the loan term. But since interest is deducted, the amount you borrow will be changed to £88,000.