How to get a Bridging Loan in Northern Ireland

Can a bridging loan be used as a replacement for a mortgage in Northern Ireland?

A  bridging loan works in a similar way to a mortgage, by securing a loan on property although it is not a mortgage. 

Whilst a bridging loan would not be recommended as a long term replacement for a mortgage, it can cover the gap between a mortgage being arranged so a purchase can proceed. 

There are a number of  alternatives to bridging loans each with their own advantages and disadvantages, here are some other options to consider: 

Mortgages

A mortgage is a long term loan secured on property. Mortgages are more appropriate for longer term needs and tend to come with lower interest rates, whereas bridging loans are short term arrangements. It is unlikely you would be able to get a mortgage on a property that needed substantial work or development, whereas bridging loans can be used for development purposes.

For a detailed breakdown, read our guide to bridging loans vs mortgages.

Buy-to–let mortgage

A buy-to-let mortgage is a loan is a type of finance used to purchase rental properties that will be let out to paying tenants. This type of mortgage typically has longer repayment terms than bridging loans and lower interest rates. 

The benefit of a buy-to-let mortgage is there is no need to sell your existing property to secure a loan, and the income from tenants will cover mortgage repayments on your investment. 

Remortgaging and equity

Remortgaging is a popular option and this involves switching to a new lender or renegotiating the terms of your loan with your existing lender.  

In some cases, the value of your property will have increased since you took the original mortgage giving you more equity, which is the amount your house is worth minus the amount you owe. Increasing your equity means that your mortgage lender may allow you to borrow more. Even if the value of your property hasn’t changed, it is worth discussing options with your mortgage lender as they may be able to offer some flexibility and potential options for you as an existing customer.

Second-charge mortgage

A second-charge mortgage is a loan secured on your property, it is separate from your main, or first, mortgage and funds are provided by a different lender.  As your property is used as collateral if you default on either mortgage your home could be repossessed.

Equity is important for a second-charge mortgage as lenders will want to make sure that if you defaulted on payments the sale of your property would cover both mortgages.

Equity release mortgages

Equity release mortgages are often synonymous with people of retirement age and you will need to be aged over 55 to qualify for this option.  This financial product allows homeowners to borrow money against the value of the property and continue to live in the property until it is sold. When the property is sold the loan will be repaid with interest.

Commercial mortgages

Commercial mortgages are a long-term financial product, with repayment terms up to 25 years, secured on a property that is not where you live.

Ordinarily commercial mortgage rates will be significantly lower than bridging loan rates, however, if you do decide to pay a mortgage back earlier than agreed there may be early repayment fees. If you would like the flexibility to pay your mortgage back earlier, or overpay, then speak to your mortgage broker to match you with a lender that offers early repayment options. 

Interest payments on commercial mortgages are tax deductible and so this can help reduce taxable income and, in turn, liabilities. 

Asset Loans

Asset loans describe a category of financial products and services that help businesses and individuals secure funding based on the value of their assets. Using assets as collateral negates the need for using property.

Personal or small business loans

Small business loans are one of the main finance options used by startups and small businesses. This type of loan is quite straightforward with funding provided by a lender, often a mainstream bank, that is paid back over an agreed period with interest. 

Unsecured and secured loans

Unsecured loans are often shorter term arrangements and a type of credit that isn’t secured by assets such as property or stock that could be sold in the event of a default. Lenders will assess the creditworthiness of a business and the likelihood that they will be able to pay back the loan. 

This type of loan is considered to be higher risk as the lender does not have certainty the payments could be met, or that they will receive their money if the business defaults on the arrangement. Unsecured loans ordinarily have higher interest rates than secured loans.

A bridging loan is an example of a secured loan. Secured business loans are based on assets or ‘collateral’ so the lender will have confidence that monies can be recouped if the business defaults on payments. Often assets such as property, or merchandise are used to secure loans. 

Interest rates on secured loans are often lower as there is a guarantee that the lender will get their money back; however, with long term secured loans interest rates can be higher as a lender is tying up funds for a long period.

Invoice finance and factoring

For business owners with a strong order book, invoice finance and factoring can be an option. Invoice factoring allows you to use your outstanding invoices to secure financing, typically 80-90% of monies due. 

Factoring is where a lender will pay you directly and take ownership of the invoices, they will collect the payment and settle any remaining amounts minus their fees.

Development finance

Development finance loans are short to medium term loans designed for significant property refurbishments or developments,  and are based on the projected value of the completed works. 

Negotiating with an existing lender

A bridging loan can be used to repay your mortgage, with the interest added to the loan, leaving you with no monthly repayments to make. This can be useful if you’ve run into difficulties with your current mortgage provider and are in arrears. A bridging loan could pay off your mortgage whilst you seek an alternative arrangement, such as the sale of a property or a new mortgage.

Fast house buying companies

Fast house buying companies can be used to release equity from a property quickly. The key difference is bridging finance allows you retain ownership of the property, whereas quick house sale companies are purchasing the asset from you.

It is important to note that fast purchases companies usually offer no more than 75% of your property value, meaning they make a considerable profit on the property.

Why are bridging loans in Northern Ireland popular?

The popularity of bridging loans has risen due to their flexibility and speed. The bridging loan market has grown to become a £4.8bn industry as of 2022 and is continuing to grow. Taking a short-term bridging loan allows people to buy properties or fund purchases, for land or machinery, that mainstream lenders will not mortgage. 

What can a bridging loan be used for?

Bridging loans are flexible and can support a range of commercial opportunities, particularly in relation to developing property. 

What is the BRRR model?

The buy, refurbish, refinance and rent (BRRR) model is popular. This involves using a bridging loan to buy and refurbish a property, then refinance it at a lower rate and rent it to gain an income that will exceed mortgage payments. 

Buying a property before your current home has been sold

This is a very common reason for a residential bridging loan and allows homebuyers to proceed with a purchase whilst they are waiting to sell their home. As house sales in Northern Ireland can move swiftly a bridging loan can help secure a property whilst you sell your own home. 

Bridging loans are also very useful if your house purchase is part of a chain and a sale falls through, a speedy bridging loan can ensure that you have the funds to buy your new property. 

Buying a property at auction 

When a property is bought at an auction the sale must be completed within 28 days and this is an added reason to look for a quick finance solution.

Investing in a buy-to-let property 

Similar to renovation projects, a buy-to-let property may need work before it can be rented to tenants to generate income. A mortgage lender will not provide a buy-to-let mortgage until the property is in a suitable condition and this can include ensuring safety features, such as fire doors, are in place.

Taking a short term bridging loan to bring a property up to the required standard to achieve a buy-to-let loan is a common practice. A bridging lender would expect to see an exit plan that involved getting a long term mortgage to pay the bridging funds.

Land purchase

Much is written about bridging loans and property, however, they can also be used to purchase land with the intention of applying for planning permission. Once planning permission is granted you could refinance with development finance to provide funds for a build.

How can I get a bridging loan in Northern Ireland?

Bridging loans have become more mainstream and are now provided by many lenders. It is, however, wise to compare lenders and deals as terms vary widely. 

Additionally, if your focus is the speed of the transaction then you are likely to seek a lender with fewer compliance requirements.

Whilst individuals and businesses can apply to bridging loan lenders directly this can be a time consuming, repetitive process. With a large range of financial products available it is preferable to seek expert advice to find a lender with experience in this area, particularly in arranging  bridging loans in Northern Ireland.

Using a specialist loans broker, such as ABC Finance, means that we can negotiate with lenders to find you the best possible deal. Getting a quote is easy, our advisors will call you back for a confidential, friendly no-obligation discussion. If you wish to proceed they will help you fill in a simple form to begin searching for the right lender for you. Initial approval can move quickly and in straightforward cases funding can be made available within a few weeks.

ABC Finance business has been supporting businesses across the UK since 2000 and is regulated by the Financial Conduct Authority. Our experts work with a wide panel of lenders and take time to understand your business needs to get you the best deal; our aim is to save you money.

We’ve helped over 30,000 businesses find a loan – our Trustpilot scores and reviews demonstrate how happy our customers are with our service.

How quickly can you get a bridging loan in Northern Ireland?

Bridging loans can be arranged relatively quickly, ordinarily within 5-21 days. On rare occasions a loan can be approved in a few days although this is not typical. ABC Finance can give a funding decision 

If you are looking for a very speedy turnaround then it is advisable to compare lenders as there is a variance lender compliance requirements. It should be noted that if a lender is prepared to accept a lower standard of assurance on the property by undertaking fewer checks it is likely their risk is higher, and thus their rates will likely reflect this.

The lenders with the lowest rates often take longer as they have rigorous application processes.

You can read the ABC Finance guide to bridging loan timescales for further information on how long the application process takes.

How much can I borrow with a bridging loan in Northern Ireland?

The amount you can borrow with a bridging loan varies and is dependent on the equity available, which is what a property is worth (or will be worth when it has been renovated) minus any outstanding liabilities or loans. 

An average range for a bridging  loan is between £50,000 and £10 million; however, lenders will provide finance from £10,000 to £250,000 depending on your circumstances. Bridging loans are classed as residential for private property, semi-commercial and commercial with the financial available increasing for each category.

Bridging loan requirements

To apply for a bridging loan you will need to be 18 or over and a UK resident. You will also need to provide proof of income, bridging loan lenders in Northern Ireland commonly accept:

• Payslips
• Bank statements
• Tax returns
• Property income (demonstrated through bank statements) 

You will need to provide detailed information about the property you intend to use as security, or a clear business plan for land or property development.

Financial history is less of a concern to lenders as compared to a mortgage in Northern Ireland as interest is, in most cases, paid at the end of the loan period and secured on a property.

How much does a bridging loan in Northern Ireland cost?

Bridging loan costs vary depending on your circumstances and choice of lender, although interest rates can be as low as 0.5%. It’s worth noting that there are a number of fees that are added to a bridging loan and these should be included in your estimate when you are comparing products.

Use our free bridging loan calculator to get an estimate of what your costs would be.

Bridging loan fees

A bridging loan is a legal arrangement where a ‘charge’ is placed on a property giving a lender an interest in the property. This means that if you default on payments a lender will be able to sell the property to recoup their money.

In addition to interest payments for the loan, you can expect to pay arrangement, exit, administration, valuation and legal fees.

Many lenders will expect you to use a solicitor, see our in depth guide on this here, and you will have to pay their legal fees. 

Always keep in mind the total cost of an arrangement and any hidden fees. Using a broker and taking legal advice will minimise any nasty surprises.