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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans
How to apply for a bridging loan
To apply for a bridging loan, you should approach a reputable bridging loan broker, or apply directly to a lender.
The application process starts with the completion of an application form, which is submitted to the lender or broker, along with some supporting documents.
What we cover in this article:
- How can I get a bridging loan quote?
- Key product features
- What should I consider before making a bridging loan application?
- What documents will be required?
- How will my property be valued?
- How much deposit will be needed?
- Who can apply for a bridging loan?
- How long does the application process take?
How can I get a bridging loan quote?
There’s no right or wrong way to get a quote, but there are several options available to you. The main ones are the following:
Talk to a broker
A good bridging loan broker will offer the following benefits:
- They allow you to access the whole market without having to deal with lots of different lenders.
- They will be able to advise you on the best way to approach your application.
- Their strong relationships with lenders may benefit you during the application process.
That said, not every broker is a good one, and a poor one can cause delays to your application and even mean that you pay more than necessary.
It’s also important to consider any broker fees that you’ll have to pay. While we don’t charge a fee for arranging bridging loans, many brokers do.
Some brokers even charge upfront fees, which are often non-refundable. Paying upfront fees is usually not advised, especially as they can be easily avoided by using a fee-free broker.
Compare your options online
Check out the latest products online and then try our bridge loan calculator to work out your costs.
Online comparisons allow you to find suitable products quickly without the need to talk to anybody. This is ideal for those who want to make their own decisions and not be ‘sold to’ by a broker or lender.
That said, due to the complexity of certain circumstances, it’s always a good idea to double check things.
Enquire directly with lenders
Talking directly to lenders allows you to remove a layer from the process, but unfortunately that layer is a person who is on your side.
That said, in some cases, it can lead to cost savings, as the lender will not be paying a broker for the introduction. Some, but not all lenders will pass on the savings to applicants.
Although this can mean a saving, if you’re not getting the best deal, then your bridging loan costs can quickly spiral.
To ensure that you’re getting the best deal, the only real option is to speak to all of the leading lenders and get a quote from each.
Most lenders don’t publish their rates online, meaning that other than using a reputable broker, there isn’t a simple way to compare products.
Key product features
Key features
| Max LTV | Up to 80% |
| Interest rate | From 0.55% per month |
| Charge types | 1st, 2nd & 3rd considered |
| Term | 1-36 months (maximum 12 months for regulated loans) |
| Interest type | Added to the loan, deducted or serviced |
| Completion timescale | 5 days – 3 weeks |
Criteria
- Residential, commercial property or land acceptable
- Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
- Minimum applicant age 18 years – no maximum age
- Available in England, Scotland, Wales and Northern Ireland
- Adverse credit accepted (on a case by case basis)
What should I consider before making a bridging loan application?
The biggest considerations are how you proceed (broker, online comparison or direct to the lender) and how you will repay the loan – this is known as your exit strategy.
Your exit strategy is the key to ensuring that you stay safe and avoid failing to repay your bridging loan on time.
While it may seem counter intuitive, it’s important that you consider repaying the loan before you settle on taking it out. Failure to do this increases the likelihood of problems as the loan reaches the end of its term.
In addition, you should consider how you want the interest to be handled. You are usually able to choose between paying the interest monthly, or adding it into the loan.
When adding it to the loan, it is repaid at the end of the term, when the loan is repaid.
What documents will be required?
A lender will usually require the following when you make a new application:
Proof of ID
Proof of ID and residency are required in almost all cases. The ID must be in date and the proof of residency usually dated within the last 3 months.
Details of your exit strategy
As mentioned above, your exit strategy is key and as such, you will always be asked for full details around it. You will also be asked for proof that it is viable, for example, when selling the property, the lender will check that it is viable within the term of the loan.
For refinances, you will be asked for a decision in principle from the new lender (or proof that they will approve it based on current criteria).
Details of any refurbishment works and the cost associated with them
When taking out property refurbishment finance, you will be asked for details of what you’ll be doing and the costs involved. Where the property is being refurbished, this is always required.
A business plan
Where the application is for a start-up business, a business plan may be required along with projections to ensure that your exit strategy is viable. These applications will usually be for commercial bridging loans.
Proof of income
While not often required, a lender may ask for proof of income. This is usually restricted to applications where you’ll be paying the interest monthly, or where your exit strategy relies on your income.
Regulated bridging loan lenders may be more likely to request proof of income than on unregulated applications.
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How will my property be valued?
As you’re borrowing against the value of your property, every lender will want to understand exactly what that value is.
That can be achieved in a few ways. The first is a full valuation report, produced by a RICS surveyor. This approach is the one that is considered the be the most secure option by lenders as the property has been physically inspected and is backed by the surveyor’s professional indemnity insurance.
It is also the slowest approach as you must wait for an appointment, and then for the report to be produced.
To speed things up, some lenders will accept a desktop valuation, known as an AVM. This approach sees the valuation figure being generated by a computer system using the property details and local sales data.
It is less reliable than a physical inspection but can be produced in a matter of minutes. This approach is not offered by all lenders.
Finally, some lenders will proceed without any form of valuation being produced if they’re familiar with the area and the loan is at a very low loan to value.
Lenders who take this approach tend to be those who charge much higher interest rates.
How much deposit will be needed?
Most lenders are happy to offer a loan to value ratio of 70-75%, meaning your deposit would be 25-30% of the property value. This is true of both regulated bridging loans and unregulated bridging loans.
If you’re planning on deducting the interest from the loan upfront then the amount you receive (known as the net loan), will be reduced. As such, you will need to pay the difference by way of additional deposit, meaning that you can expect to put down 30-35% of the property in total.
In addition to this, you should consider the cost of legal fees, surveyors fees and Stamp Duty (for some purchases) as these must also be paid.
In some cases, the amount of deposit may increase where there is a history of adverse credit, the property is poor or in a low demand location. These are known as bad credit bridging loans. Your exit strategy will may also impact the loan to value that you’re able to achieve.
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Who can apply for a bridging loan?
We can lend to the following borrowers:
- Private borrowers
- Pension funds
- Partnerships
- Limited companies
- Offshore companies
Our minimum applicant age is 18 years old and we work with lenders who do not impose a maximum age.
How long does the application process take?
This is one of the main benefits of taking out a bridging loan – they can complete very quickly. It’s common to see an application complete within 14 days of being received by the lender.
In some cases, there is a choice to be made between cost and speed of completion. Some of the cheapest lenders have stricter underwriting processes and may take a little longer.
When looking to complete very quickly, looking to use an AVM instead of visit by a surveyor can shave off valuable time.
How can I get my funds quicker?
The key to getting your application completed quickly is to be thorough when providing information. By being clear and ensuring that you leave no doubt in your answers will inspire confidence from the lender.
This will help to speed up your application and ensure you get the funds needed quickly.
About the author
Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in invoice finance
Gary is an experienced finance professional who holds CeMAP, CeFA, CeRGI and CSP qualifications. He has a well rounded background across financial services and has worked with commercial finance, bridging loans, financial advice, pensions and insurance throughout his career.
These days, Gary heads up a lot of the operations at ABC Finance, works closely with the team and leads our work to build and integrate new technology to the business.
He regularly appears in and writes for the press including local and national news, trade publications and specialist business news.