What is a Bridging Loan?
A bridging loan or bridge loan is a loan between £25,000 and £5,000,000 that can be used for any purpose. It is often used to bridge the gap in funding. For example, if you are selling a property, but needs funds now, you can take a bridging loan and pay the full loan back when you sell the property. You can also elect to repay the interest at the end as well. The loan is traditionally secured over a UK property, although other assets can be considered.
How much does it cost?
The only cost up front is the most of the valuation of your security / property. This is paid direct to the surveyor.
The other costs are all paid at the end of the bridging loan and these typically include:
– an arrangement fee of 2%
– interest from 0.75% per month to 1.5% per month
Can I pay the interest at the end of the loan?
Yes – and most people do. You can opt to pay the interest monthly or at the end of the loan.
Who Can Apply?
Anyone can apply – an individual or company. The only thing that is required is that the property is based in the UK.
What if I have bad credit?
That is fine. In fact, a lot of borrowers have an imperfect credit score. You can still get a bridging loan. Often people use a bridging loan to improve the finances and credit by repaying their arrears and having a clean file whilst they seek re-finance during the bridging loan term.
The main consideration for a bridging loan is the value of the security and the equity in it.
What if I have no income or can not evidence the income?
This is also acceptable as you do not have to service the interest or loan monthly – you can pay it all back at the end of ht loan. The important point with a bridging loan is your ability to repay the lona at the end of the period.
Acceptable repayment methods are:
1. sale of the security or another property
3. funds due from a business
4. funds due from a divorce.
What if I can not pay back the loan at the end of the loan period?
Firstly, don’t worry. An extension of ht loan will be allowed in 95% of cases provided that your ability to repay the loan is realistic.
How long can I borrow the money for?
From 1 month to 2 years.
How much can I borrow?
from £25,000 to £5,000,000
What is your Loan To Value?
This depends on the type of security, eg. whether it is land or a property. As rule of thumb.
Residential or Buy To Let properties – 75%
Commercial Premises – 70%
Land – 60%
Pubs, Hotels. Clubs, Weird and Wonderful – 55%