Bridging Loan Agreement in Principle

Before you apply for a bridging loan, you must first be approved by a lender. They do this by offering an agreement in principle to signal an intention to lend and the terms at which they intend to offer you finance.

If you need a bridging loan agreement in principle quickly, speak to ABC Finance. We can offer terms for residential, commercial, mixed-use property and land.

Bridging Loan Agreement in Principle Explained

What is a bridging loan agreement in principle?

A bridging loan agreement in principle (AIP) is a document issued by a lender that details how much money they are offering in principle, to lend, along with the associated costs of the finance including the proposed bridging loan rates and fees.

This document offers a good understanding of the loan terms available, based on your circumstances, before you formally apply for a bridging loan.

In terms of bridging, some lenders will provide lending terms with very little information needed from the customer, however the more information provided, the more accurate the terms will be.

Due to the nature of bridging, it’s often worth discussing the proposal with a lender and obtaining an AIP before proceeding. This can be the case with auction purchases, un-mortgageable properties and instances of adverse credit.

In the case of auction purchases, it’s advisable to check whether you’re eligible for the loan before bidding and exchanging on the purchase. This type of loan is known as auction finance.

An AIP isn’t a formal loan offer or guarantee of funds, it is merely the lender offering to lend subject to full underwriting, valuation and legals.

Read more – Divorce settlement – how a bridging loan can help or Buy to let mortgages vs bridging loans.

What is a bridging loan agreement in principle used for?

An AIP is a useful tool to enable borrowers to see how much they can borrow, along with the associated costs. This helps when either budgeting for a project or to check whether the loan is cost effective.

When purchasing a property, most estate agents like sight of an AIP to evidence that you are both serious and in a position to buy.

They can also be used for a variety of other reasons such as proof of funds when re-bridging (also known as a refinance bridging loan), proof of funds when stopping repossession or to evidence repayment of debt or arrears.

Why work with ABC Finance?

Here at ABC Finance, our advisors will work with you to make sure the bridging loan you apply for is the most suitable and meets your needs.

We have been offering finance since the year 2000.

How much can I borrow?

Minimum and maximum loan sizes

Bridging loans range from £10,000 with no maximum loan size.

We offer specialist ranges for larger loans including large bridging loans for loans over £1,000,000 and London bridging loans for properties in the capital.

Loan to value requirements

Bridging finance loan to value (LTV) ratios are available up to 90%, however 75% tends to be the maximum for most scenarios.

Bridging loan interest rates & costs

What interest rate will I pay?

Bridging loan interest rates start at 0.39% per month and can go to 2.5% per month.

The interest rate is case specific, therefore it’s best to speak to one of our bridging advisors for an accurate idea of costs.

Are there any upfront costs to pay?

No, we don’t charge upfront fees for obtaining a bridging loan agreement in principle.

How do I obtain a bridging finance Agreement in Principle?

Applying for an AIP can be simple as long as you know which lender to apply to, and you have a good idea of what you want from the loan.

Different lenders have different criteria and product ranges, therefore applying to the right lender is crucial.

Due to the number of options available, it’s worth seeking advice from a broker as they will know the right questions to ask upfront, and will in-turn know which lenders to speak with.

Generally, information such as property details, personal details such as income and credit profile, and planning exit or repayment strategy will be needed.

In the case of Regulated bridging, most lenders will require you to apply through an FCA Regulated Broker such as ABC Finance.

Should I work with a broker or go to a lender direct?

This comes down to personal preference however it’s often a good idea to speak with a broker, especially if they do not charge a broker fee.

Quite often, even with seasoned property investors, advice and guidance on which option is most suitable is often appreciated.

Due to the vast number of lenders available, it’s difficult to select the best one. An experienced broker, such as ABC Finance, will know which way to turn almost immediately and due to ongoing relationships with lenders, may be able to negotiate the interest rate and fees on your behalf.

Another advantage is that a good broker will know how to package your enquiry to suit the lenders requirements, this will give you the best chance of being accepted for an agreement in principle. This is even more appealing if there is no fee for doing this.

If your loan is regulated, you need to apply for an offer in principle through an FCA Regulated bridging loan broker. We at ABC Finance Ltd are FCA Regulated.

What documents will I have to provide to obtain a decision in principle?

With bridging, this can often depend on the lender chosen and type of loan chosen, i.e. regulated or non-regulated. Typically, the documentation is as follows:

In all cases:

• Factfind or application form, much the same as a mortgage application.
• Proof of identification, such as a Passport Copy or Drivers Licence.
• Proof of your address, generally in the form of a utility bill dated within the last 3 months.

In a majority of cases:

• Evidence of income, i.e. tax return, payslips, P60 etc.
• Latest 3 months bank statements.
• Up to date credit report.
• Asset & liability statement.
• Proof of deposit, if a purchase.
• If refinancing to exit, a remortgage AIP.

Some asset only based non-status bridging lenders may only ask for proof of ID and residency.

How long does a bridging finance agreement in principle take to obtain?

Some bridging loan lenders can issue an AIP within 30 minutes, however more complex bridging loans may take slightly longer.

If the lender is carrying out a full assessment of the loan before issuing a decision in principle, it could take 24 hours.

Please let us know if you require your AIP urgently.

Frequently asked questions

How long is an Agreement in Principle valid for?

This varies lender to lender however typically between 30 to 90 days.

This timeframe should be more than enough for your needs however it’s worth noting that some lenders will only honour the terms of AIP if the full application is submitted, and in some cases, the valuation fee needs to have been paid.

What happens if my AIP expires?

If your circumstances remain the same, this is generally fine as you can look to extend or re-apply for a new AIP.

If the lender has changed criteria, rates or fees, the AIP terms will also likely change in line. If the new AIP is more expensive, it’s worth reconsidering whether this is the best lender or product.

Do I need multiple AIP’s?

No, realistically you only require one AIP per transaction. It’s always an idea to have a back-up lender available should the first lender decline to lend at full application stage.

What happens if my AIP is declined?

This isn’t necessarily an issue as there may be other options available.  We would look into the reasons for the decline, and look at alternative lenders.

The most common reasons for decline are the condition of the property or an adverse credit profile not being disclosed. This is why providing accurate information upfront is so important.

Agreement in principle vs decision in principle (DIP) vs offer in principle (OIP)

These are all terms meaning the same thing. Different lenders call their agreements different things however they will all likely contain the same, or similar information.

Can ABC Finance help me find the best deal?

Yes, ABC Finance Ltd will find the best bridging loan rates and product for your circumstances.

Do I need to provide proof of income?

The lender may provide an agreement in principle without the need for proof of income.

It is better to find out upfront whether this will be needed later on as if it can’t be provided, your AIP may not be valid.

How can I calculate my expected costs?

You can use our bridging loan calculator or speak to one of our bridging finance advisors.