Frequently Asked Questions about Bridging Loans
We are pleased to answer some of the most common questions to do with bridging finance. Simply click on the question title below and the answer will drop down. For any further questions not included in the list below, we have provided some guides at the bottom of the page or you are free to contact us by email or phone and one our team will get back to you as soon as possible.
Are you a broker or a lender?
We are a broker based in London, England who is authorised by the Financial Conduct Authority. We have a partnership with the award-winning Brightstar Financial who will process all enquiries and ensure that you receive a quality service and the most responsible and affordable product for you. As part of the commitment to Treating Customers Fairly, you will always receive the cheapest loan available.
What is a bridging loan?
This is a form of short-term finance used to pay for a property or business investment where there is an urgency to complete. Rather than going through the traditional process of applying for a mortgage that can take several weeks or months, bridging can usually be funded in a shorter timespan and the funds can be transferred in one lump sum.
Who is the typical customer for bridging?
This kind of finance is ideal for the property industry where potential buyers, developers and investors need a quick injection of cash in order to secure the property and avoid being gazumped by another party. Particularly when buying property at an auction, you have 28 days to come up with the full amount so getting the finance you need through a bridging loan can be more time efficient than a mortgage application. Other common uses include raising money for a business, investment opportunity, home refurbishment or improvement.
Is a bridging loan always secured?
Yes, bridging is typically secured on the property you are trying to raise money for. The idea is that your borrowing facility is based on the potential value of the home (affordability and credit checking too) and whether the lender can recover their debts in the unlikely event that they have to repossess it.
What is the average cost of a loan?
With rates starting at 0.59% per month, a £100,000 bridging loan would cost £590 per month in interest, over 12 months cost £7,080 in interest, total repayable £107,080.
Other fees not included are the lender fee (2%), broker fees (1%) and any additional solicitor and valuation fees you incur.
How soon can the funds be transferred?
On average, the lenders we work with are able to send the entire funds to your bank account in one lump sum in 10 to 14 days after the loan has been approved. There is usually an average of 3 to 4 weeks from the start of the application to completing and receiving the funds.
I have bad credit, can I still apply?
Yes, all credit scores are considered. Some of the lenders we work with are “non status lenders” meaning that they assess the potential and value of the property or business in question when deciding your eligibility.
What is a 1st charge and 2nd charge mortgage?
A 1st charge mortgage refers to your property that takes first priority when you make monthly repayments e.g the home you live in. A 2nd charge mortgage is the second mortgage you have taken out and is therefore the second priority when it comes to monthly repayments. Whether your loan is a first charge or second charge will make a difference in the amount you wish to borrow. As first charge takes priority, lenders will tend to offer less money if it is your second mortgage because they realise that in order to recover their funds, they are second on the pecking order.
What repayment options are available?
There are several repayment options that you can discuss with your lender to suit your circumstances. This includes paying standard monthly repayments, rolling over all the interest until the end of the loan term or even deducting the interest (although this will mean borrowing less).
What is meant by a “non-status lender”
A non-status lender means that they do not consider credit scores during the application and approval process, rather looking at the value of your property or business opportunity as a deciding factor. Non status providers are not regulated by the Financial Conduct Authority but are still fully licensed to operate in the UK.
How long is the loan term?
The duration of a bridging loan varies from lender to lender, with a maximum of 12 months typically for regulated companies and up to 24 months for non-regulated providers. Lenders will almost always give you the option to repay your loan early – some will charge you an early exit penalty and some will not. Be sure to check the terms of your loan agreement.
What is the typical loan-to-value (LTV)?
The loan to value for regulated activity is a maximum of 70% and this can increase up to a maximum of 75% for non-regulated lenders. Your LTV will depend on your income, affordability, credit scores (for FCA regulated lenders) and above all, the amount you need to borrow.
How much can I borrow?
We are able to facilitate loans ranging from £50,000 to £25 million. The amount you can afford to borrow will depend on several factors such as the property or business in question and its potential value. Other considerations include income, affordability and credit file.