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Using a Bridging Loan to Buy a House

Consider this: You've stumbled upon the dream property—the one that speaks to you in ways only a home can. But time is of the essence, and the conventional loan process may not align with your urgency. Enter bridging loans, the nimble solution for swift property acquisitions. Let's delve into a few scenarios showcasing how a bridging loan can be used to purchase property.

Unlocking the door to your new home can sometimes require unconventional keys. Bridging loans have swiftly risen to the forefront of property finance over the last 15 years, offering a dynamic solution to expedite house purchases. But why have they become the go-to choice for many?

While mortgages remain the traditional avenue for property purchases, bridging finance emerges as a beacon of opportunity, particularly in scenarios where mortgages fall short. Its inherent advantages empower buyers to navigate circumstances where traditional mortgage options may prove inadequate, opening doors to property acquisitions that might otherwise remain elusive.


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Why opt for a bridging loan?

Picture this: you've stumbled upon a once-in-a-lifetime opportunity, whether it's snagging your dream home before your current one sells or diving into an ambitious HMO renovation project. Bridging loans emerge as the perfect companion for such time-sensitive ventures, leveraging the purchased property or existing assets as collateral. This not only grants you the freedom to act swiftly but also offers a level of eligibility flexibility beyond the confines of traditional mortgages, paving the way for seizing opportunities that might otherwise slip through your fingers.

Other ways a bridging loan can be used:

Why are bridging loans different?

When it comes to securing property finance, the well-trodden path often leads to traditional lenders like high-street banks or building societies for a mortgage.

Yet, bridging loans boast a plethora of features that render them a compelling choice for financing a home purchase, especially in scenarios where a standard mortgage falls short.

Bridging finance is short-term

Bridging loans serve as a short-term financing solution, a departure from the long-term commitments associated with mortgages, which typically span 20 to 35 years, reflective of their respective cost structures and interest rates.

These loans, designed with a short-term focus, generally have a maximum term of 12 months for regulated bridging loans secured against or utilised for residential properties, with extensions up to 24 months feasible in certain circumstances, such as higher income brackets. The essence of bridging finance lies in its ability to swiftly 'bridge' financial gaps, offering timely solutions for scenarios like the interim period between property sales and purchases or the transition phase from acquiring an unmortgageable property at auction to its subsequent renovation for resale or mortgage qualification.

It is relatively easy to arrange bridge loans

Unlike the protracted process often associated with standard mortgages, bridging finance arrangements can be expedited significantly, with select lenders capable of processing applications and disbursing funds within a mere seven working days, contingent upon individual circumstances and eligibility criteria.

Interest rate payments each month can be deferred

Bridging loans offer the flexibility of deferring monthly interest payments, allowing borrowers to 'roll up' interest to be settled at the term's conclusion, thus optimizing available funds for property acquisition or renovation purposes.

High LTV lending is available

The loan-to-value (LTV) ratio is another notable aspect, with most lenders willing to extend financing up to 75% LTV, while certain non-regulated property developer loans may reach up to 80% LTV, contingent on the specific circumstances and asset securities involved.

Work out your exit route

However, the acquisition of bridging finance necessitates a well-defined exit strategy, ensuring a clear pathway for loan repayment at the term's conclusion, typically through property sales or long-term mortgage arrangements.

No early repayment fees

An advantageous facet of bridging loans is the absence of early repayment fees commonly associated with long-term mortgages, offering borrowers the freedom to settle the loan ahead of schedule without incurring significant penalties, as bridging loans are tailored for short-term financial needs with flexible minimum terms, often as brief as one or three months. Additionally, interest is typically calculated solely on the duration the loan is outstanding, promoting cost-effectiveness and financial efficiency for borrowers.

How it works

get-in-touch
Get in touch

Clients approach UK Bridging Loans either directly or via introducers. Basic questions by way of a “fact-finding” process are used by UK Bridging Loans to determine if the lending requirements are a possibility.

home-valuation
Fast approval

An immediate yes or no answer is given, and if suitable, a quotation is formulated and forwarded to the client, usually by email.

fast-approval
Formal offer

A formal offer is produced for any client wishing to proceed and forwarded for signature, again, usually by email.

representative-visit
Representative visit

Each client is visited at the security address for the signature of the remaining loan paperwork, including a CH1 land registry charging order. We will also collect any additional pre-requested documentation.

underwriting
Dedicated underwriting

The signed documentation was immediately sent to our underwriters. Our model is based on very quick completions, as each deal is funded using all of our own money. On rare occasions, we may request additional information.

access-funds
Payment of funds

Average completion from initial acceptance to pay-out is usually just a few days. We rarely require valuations or additional legal representation. The land registry charge will be removed once the bridging loan is repaid.

Who can use bridging finance?

people

Age

The applicant could be too old to obtain a standard high-street mortgage, as most mortgage lenders now prevent borrowing beyond what is deemed “normal retirement age”.

property-condition

Property conditions

The property may be in a condition where it is not suitable for mortgage financing, and as such, a bridging loan could be used to complete the purchase and any required work prior to refinancing.

credit

Credit

The applicant may have had some adverse credit, however minor, which was previously acceptable to lenders but now no longer fits the high street lending criteria.

income

Income

The applicant may have difficulty proving the income requirements needed for more regular financing. This may be due to poor self-employment records, a break from work, a reduction in self-employed workloads, or overtime.

USP's

  • cloud Superfast completion, often within days
  • cloud Land, with or without planning
  • cloud 2nd charge (consent is not always required)
  • cloud Quick auction finance
  • cloud 3rd charge (consent is not always required)
  • cloud Adverse credit is considered
  • cloud 2nd charge behind the bridging lender
  • cloud 2nd charge behind the equity release lender
  • cloud Up to age 85
  • cloud Pure equity-based lending
  • cloud Residential and commercial
  • cloud Valuations are not always required
  • cloud Loans from £25,500
  • cloud A free legal option
  • cloud No monthly payments

Frequently asked questions

How much deposit do I need for a bridging loan?
Indeed, a deposit ranging from 20% to 40% is typically required for a bridging loan. While securing a 100% bridging loan without a deposit is feasible, it necessitates alternative assets for collateral and may entail stricter eligibility criteria and elevated costs.

Is a bridging loan cheaper than a mortgage?
Due to its short-term nature, the interest rate on a bridge loan tends to be notably higher than that of a mortgage, typically hovering around 1% per month. This discrepancy in rates reflects the perceived higher risk associated with short-term financing. Interest accrues on a monthly basis, although borrowers have the option to 'roll up' the interest, deferring payment until the end of the loan term.

Can anyone get a bridging loan?
Broadly speaking, bridging loans cater to both individuals and businesses seeking short-term financial solutions to bridge gaps between property transactions or to facilitate expansion and investment endeavours. While commonly utilised for residential property acquisitions, bridging finance extends its utility to businesses pursuing growth opportunities.

Is it difficult to get a bridging loan?
Securing a bridging loan can vary in difficulty depending on individual circumstances and the lender's criteria. Generally, bridging loans require a clear exit strategy, sufficient collateral, and a strong credit profile. While some lenders may have stringent requirements, others offer more flexibility, particularly for borrowers with valuable assets or higher income levels. Additionally, working with experienced brokers can streamline the process and increase the likelihood of approval. Therefore, while obtaining a bridging loan may pose challenges for some, diligent research, preparation, and expert guidance can significantly ease the process.

How long does a bridging loan take?
The timeline for completing a bridging loan typically spans between 5 and 21 days. However, the speed at which your application is processed can vary significantly depending on your chosen lender. Certain lenders excel at expediting the process, ensuring swift completion of your application. Therefore, if time is of the essence for your application, it's advisable to explore multiple lender options to find the most expedient solution.

Bridging loan uses

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