How to get a Bridging Loan in Scotland
If you’re in need of a fast, low cost bridging loan in Scotland then ABC Finance is here to help.
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How do bridging loans in Scotland work?
Scottish bridging loans have many similarities to bridging loans across the UK; however, there are some subtle yet important differences.
Bridging loans for residential property and homebuyers in Scotland
A property sale in Scotland is legally binding much earlier in comparison to England, Wales and Northern Ireland and prospective buyers work on a sealed bid basis. This means that if you are looking to purchase a property you may need to move fast and if you haven’t already sold your property you could miss out.
An example of how a bridging loan would work:
- You want to buy a house for £600,000 and you need to put down a £200,000 deposit and borrow the rest on a mortgage.
- Your house hasn’t sold yet and you only have £50,000 in savings.
- You ‘bridge’ the gap and get a bridging loan for £150,000 to cover the deposit until you sell your house.
- When your house sells you pay off the bridging loan with interest (accrued on a monthly basis and payable at the point of loan exit.)
The maximum loan amount in Scotland is normally up to 75% loan-to-value, so 75% of what the property is worth. This is a figure set by the Financial Conduct Authority (FCA). Not all loans are regulated and whilst some lenders will provide a higher loan-to-value these are unregulated loans that do not offer the oversight and protection that the FCA provides.
Bridging loans for commercial property in Scotland
Commercial bridging loans are financial products that are frequently used by the business community, particularly property investors and developers. As with residential bridging loans, a commercial loan is a short-term method of funding a purchase. The types of scenarios where a commercial bridging loan is used are to buy property, land or machinery and also to complete renovations.
The average repayment period for a commercial bridging loan is twelve months, although this can extend to 18 months. A bridge solution is meant to be a stop-gap until longer term funding is secured. For example, a high street bank or conventional lender may not offer a mortgage on a buy-to-let property until work has been undertaken on it to ensure it meets acceptable building and safety standards. A commercial loan can provide funds for renovation and then once work is complete the property owner can secure a long term, lower interest financial product such as a buy-to-let mortgage.
How much can you borrow with a bridging loan in Scotland?
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.
How quickly can you get a bridging loan in Scotland?
A key feature of bridging loans is the speed at which they can be arranged, in Scotland solicitors often sell properties directly acting as legal adviser and estate agent streamlining the process.
In Scotland a seller must provide a home report upfront giving detailed information about the property; this means that there are fewer checks to be completed by the lender when they are assessing a loan application.
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 can you get a bridging loan in Scotland?
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 Scottish bridging loans.
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.
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Can a bridging loan be used as a replacement for a mortgage in Scotland?
A bridging loan is not a mortgage but works in a similar way, by securing a loan on property.. Scottish property law is unique and property purchases follow a set process that makes them more streamlined than the rest of the UK, meaning they advance to a legally binding stage more quickly.
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.
Why are bridging loans in Scotland 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.
