Bridging Loans London
Specialist Bridging Products For The London Market
Bridging lenders often offer special terms for loans in London. Find out how the market works and get the best deal with ABC Finance
Over 30,000 loan-seekers helped
FCA Authorised – Fully regulated
Receive your funds in as little as 4 days
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in bridging loans
If you’re looking for a bridging loan secured over London property, we can help.
We work with lenders who specialise in the London property market and high net worth clients.
Bridging loans London explained
What are bridging loans London?
Bridging loans London, or bridging finance London, is a term used for short-term loans secured against property, however they are geared towards the London property market.
How can bridging loans London benefit me?
If you own, or are looking to buy a property in London, a bridging loan is a great financial tool to raise funds quickly.
Due to the London property market being popular with both UK based borrowers and overseas investors alike, raising funds quickly can be crucial when buying a property in London.
London property is classed as prime real estate and as such, certain parts of the market can move quickly. This is where bridging finance comes into force, allowing you to secure a property transaction quickly.
How do they work?
Bridging finance for London property works much like standard bridging finance however the expertise of both the lender, and broker, come into force.
What are bridging loans London used for?
Bridging loans for London property are used by borrowers to allow them to borrow to fund a purchase or project when time is of the essence.
The typical London bridging loans we see at ABC Finance are:
- Auction finance for a London property auction
- To fund a chain break
- To purchase or finance investment property
- To purchase a large property portfolio.
- Developer exit finance
- Applications from overseas investors
Key product features
Key Features
Max LTV
Up to 80%
Interest rate
From 0.45% 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
4 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
Habitable and non-habitable property acceptable
Adverse credit accepted (on a case by case basis)
Bridging loans London lending criteria
Will I qualify for a London bridging loan?
If you are looking for a bridging loan secured against a property in London, yes.
If you’re an overseas investor, high net worth individual (HNW) or looking to borrow against London property, you are eligible.
What loan term can you offer?
Bridging loan terms range from 1 month up to 36 months, in most cases 24 months is the maximum term available. The term is often arranged to suit your loan repayment plan, sometimes called your exit route.
If your exit route is to sell the security property, or another property, the loan term needs to be long enough for the sale to be realistic, this should really be a minimum of 9 months.
If you will refinance the bridging loan onto longer term finance, the loan term can be shorter and will depend on how long the refinance will likely take.
The key with choosing a loan term is to ensure its long enough to be able to repay the bridging loan, otherwise the loan could default.
What checks will the lender carry out during the application process?
During the loan application process, the lender will assess the following:
- The reason for the loan.
- Your cash deposit or equity position.
- The property value and its security for the loan.
- Your credit history.
Will I qualify if I have bad credit?
Yes, many lenders offer bad credit bridging loans in London and consider varying levels of adverse credit.
Usually, the severity of the adverse credit impacts the interest rate you will pay and the loan to value offered.
When overseas investors buy property in London, they may not have a UK credit footprint at all, this too can be acceptable by bridging loan lenders.
Who can take out bridging loans for London property?
We can arrange bridging finance for London real estate to the following borrowing entities:
- Individuals, partnerships or LLP’s.
- High net worth (HNW) borrowers.
- Limited Companies, including Offshore.
- Complex multiple ultimate beneficial owner (UBO) structures.
- Pension Funds.
- Overseas investors
How much can I borrow?
Minimum and maximum loan sizes
Bridging loans against London property range from £10,000 up to £50,000,000, although some lenders have no maximum loan size.
In some cases with large loans running into the tens of millions, two, or multiple lenders may pool together to provide a funding solution.
We offer a range of specialist large bridging loans for loans over £1,000,000.
Loan to value requirements
75% loan to value is available when securing against a standard residential property in London. However, 100% of the purchase price is available when borrowing against multiple properties, such as your home or investment property and a new property.
When buying a property in London for investment purposes, 85% of the purchase price can be obtained if you are carrying out a light refurbishment, or 90% LTV for some auction purchases.
If you are looking to develop or convert a property in London, and are borrowing the funds for this too, up to 75% net day 1 plus 100% of the refurbishment costs can be obtained.
The maximum loan to value (LTV) currently offered on a re-bridge is 75% for residential property in London on a non-regulated loan basis.
Second charge bridging loans secured against property in London tend to be capped at 70%.
Commercial bridging loans are usually capped at 60-65% loan to value, this depends on the asset type.
Due to the London housing market being stagnant in areas, the loan to value will be determined by factors such as the valuation and commentary around the length of time to sell the asset, and the location of the property.
Does income affect my maximum loan?
In most cases income doesn’t usually affect your maximum loan, unless you are raising a mortgage to repay the bridging loan. In this case, income may be assessed to ensure sure a refinance is achievable.
Some non-status bridging lenders who offer unregulated bridging loans don’t ask for proof of income, regardless of the repayment plan.
Exit strategy & the impact on maximum loan
The exit strategy for bridging finance is crucial, especially when securing against prime London real estate. This is because London is home to some of the most expensive property in the country and due to this, saleability is restricted to very wealthy buyers.
The maximum loan will be determined by the exit strategy, and when looking at exit strategies for bridging loans in London, this is usually broken down into 2 plans:
- Sale of property, the lender will need to be certain that the property will sell for enough to repay the loan.
- Refinance, you may look to refinance onto a longer term mortgage or if you have carried out a refurbishment, short-term development exit finance or a standard mortgage once the development project is complete. Again, the bridging loan lender will look at the max loan on exit to determine their maximum loan offered.
Bridging loans London interest rates & costs
What interest rate will I pay?
When you take out a bridging loan secured against an asset in London, the interest rates start at 0.45% for non-regulated loans, however as with all types of finance it’s priced on risk. The interest rate will be determined by looking at the loan to value ratio, your credit profile, whether the loan is against residential or commercial property and is a 1st charge or 2nd charge.
Typical regulated bridging loan interest rates range from 0.54% to 1.15% per month.
A commercial, or semi-commercial bridging loan will cost 0.85% – 1.15% per month in most cases.
Interest rate is important, however the overall lender fees should also be taken into account. Working with a specialist bridging loan broker, such as ABC Finance, is valuable. We’ll source the best loan offer for your circumstances.
For more information, read our guide to bridging loan rates.
Are there other set up costs to consider?
Yes, the other costs to consider are:
- Lender arrangement fee – this is the fee that the lender charges to set up the loan and is usually between 1-2% of the loan amount. This fee can be added to the loan. Lower arrangement fees tend to be reserved for larger loans, which is common for bridging loans in London.
- Loan exit fee – some lenders charge an exit fee on repayment of the loan and if charged, it’s usually an extra month’s interest or 1% of the loan. We always look to use a lender who doesn’t charge an exit fee.
- Valuation fee – most lenders require some form of valuation of the property. This can be a physical valuation, automated valuation (AVM) or a desktop valuation. This is to ensure it is suitable security for the loan and that the lender is protected. Where a physical or desktop valuation is needed, the fee charged generally increases as the property value increases.
- Legal fee – there is a fee to pay for the legal work involved in setting up the loan. You are usually expected to pay the lenders legal costs, as well as your own.
- Broker fee – some London bridging loan brokers charge broker fees for arranging bridging loans. This may be a flat fee or a percentage of the loan amount. Where charged, it is usually payable on completion. We don’t charge broker fees for arranging bridging loans.
Are there any upfront costs to pay?
In most cases, there are upfront costs payable before the loan completes. Valuation and legal fees are payable before completion of the loan. Some lenders offer a free automated valuation and add legal fees to the loan.
If you are carrying out a refurbishment of the property, it’s likely a valuation will be needed. The same applies if you are borrowing against land.
If you require a product with no upfront costs, please let us know at the outset. This may be possible however you may pay a higher interest rate on your borrowing.
Do ABC Finance charge fees for arranging bridging loans in London?
We don’t charge a broker fee for arranging bridging loans of £100,000 or above. Due to loan amounts in London generally being large, it’s unlikely a broker fee would be charged.
How to get bridging loans in London
What is the application process?
- You can speak with lenders yourself, or speak with a bridging loan broker with experience of dealing with the London property market, to run through your finance needs.
- When a suitable lender, and product is chosen, your loan application form and supporting documents are submitted for review.
- The loan underwriter will assess your application and if happy to proceed, will instruct the valuation or run an automated valuation (AVM).
- When the valuation report is back, if the details are satisfactory the offer will be issued and legals instructed.
- Both yours, and the lenders solicitor will work towards a completion date.
You can instruct valuations and solicitors before underwriter assessment. This will speed up the process but is at your cost should the underwriter decline your application.
Should I work with a broker or go to a lender direct?
Working alongside an FCA regulated bridging loan broker is definitely advantageous, especially if they don’t charge broker fees. This is effectively a free bridging loan comparison.
A good bridging finance broker will have many years of experience in the London property finance market and will know exactly which lenders to deal with.
Here at ABC Finance Limited we also assist with your loan application and liaise with the lender, valuer and solicitors for you.
We’re also on hand after loan completion to assist with your repayment plan.
You can of course deal with lenders yourself and compare bridging loans. Many lenders do work directly with the public, however speaking with multiple lenders and comparing loan offers, including interest rates and fees can be time consuming.
What documents will I have to provide?
To make a loan application, both brokers and lenders will require the following documents:
- Application form including synopsis and loan repayment plan.
- Proof of identity (ID), i.e. Passport copy or driving licence.
- Proof of address, i.e. a recent utility bill or credit card statement.
- Latest 3 months bank statements.
- Proof of deposit for purchase applications.
How long does the application process take to complete?
A typical bridging loan application takes from 3 days to 4 weeks.
The completion time from applying for the loan to completion will depend on several factors, such as:
- Whether a physical valuation or an AVM is needed.
- The lenders application processing time, including their current workload.
- Whether both the lenders, and your solicitor has capacity to complete within a deadline.
- How quickly you are able to send the required forms and documents.
Of course, some lenders can release funds quicker than others, if you have a deadline to adhere to you should make us aware of this from the outset. We can then choose a lender who can meet the deadline, and assist you in streamlining the process.
How is my application assessed?
Lenders assess bridging finance applications secured against London real estate on whether they feel that the loan can be repaid within the pre-agreed timeframe.
Types of bridging loans London
Are there different types of bridging loans London?
Yes, there are different types of bridging loans that can be secured on property in London, here are some examples:
Large bridging loans
Large bridging loans of up to £50m and beyond are especially useful when lending in the Capital. As London house prices in affluent areas, such as Belgravia, Knightsbridge, Kensington, Mayfair and Chelsea are amongst some of the highest globally, bridging loan sizes naturally follow in-line.
First charge bridging loans
A first charge bridging loan is secured on a first charge basis and will offer the lowest interest rates.
Second charge bridging loans
Second charge bridging loans sit behind your current lender on a second charge basis. Due to the increased level of risk, interest rates are usually higher when compared to first charge bridging.
Bad credit bridging loans
We are able to offer bad credit bridging loans for applicants with adverse credit looking to bridge. This can include mortgage arrears, CCJ’s and defaults, IVA’s and bankruptcies and repossessions.
Commercial bridging loans
Commercial bridging loans are available for bridging and are secured on commercial property such as pubs and restaurants, hotels, B&B’s and guesthouses, retail units and industrial units or warehouses.
Semi commercial bridging loans
A semi-commercial bridging loan is secured on semi-commercial property such as retail units with flats above, mixed use sites that contain both residential and commercial property and live-work units.
Frequently asked questions
Is bridging finance London risky?
All types of finance carry an element of risk in terms of not being able to repay the loan.
Selecting a bridging lender, and broker, with a strong knowledge of the London property market will minimise any risk by highlighting any concerns at the outset. This can include outside input from valuers, surveyors and solicitors.
Due to these stringent checks, bridging loans are often safe for applicants borrowing in central London and surrounding areas.
What are the alternatives to London bridging finance?
Depending on the reason for the funds, there are various finance alternatives.
A residential mortgage can be arranged when looking to purchase or remortgage a property to live in, this process usually takes between 4-8 weeks to complete.
If you own residential property already, a second charge secured loan, often called homeowner loans, can be arranged in 5 days to 4 weeks.
Specialist bespoke buy to let investment mortgages. These can be arranged for properties in London which have lower rental yields, high end property such as luxury apartments or large loans.
A commercial mortgage or semi-commercial mortgage can be arranged on a longer term basis. Often, proof of income will be needed to arrange commercial finance.
You can secure property refurbishment finance or development finance against property to be developed, such as commercial to residential conversions.
Can I repay my loan early?
Yes, you can repay your bridging loan early and at any point during the term. There may be a minimum interest amount payable, this is usually the first full months interest.
Some lenders charge longer interest earning periods, i.e. 3 months. If you only need the loan for a very short period you should discuss this upfront.
If you only need the loan for a very short term, you should consider whether a bridging loan is suitable given the set-up costs involved.
Do I need to provide proof of income?
Most bridging loan lenders ask for proof of income as part of their loan packaging.
If you are repaying the debt via sale of an asset, proof of income can often be bypassed however if you are looking to refinance the loan onto longer term borrowing, and the new loan relies on your income, proof of income will likely be required.
In some cases, an accountant’s reference or projected future income or forecasts may suffice.
What is the minimum deposit?
The minimum deposit needed in most cases is 25% plus fees and interest for the term of the loan.
The minimum deposit needed for investors buying at auction 10%, plus fees and interest for the term of the loan.
Are these loans hard to get?
No, bridging finance for property in London can be simple to arrange, especially when using a reputable bridging loan broker.
How do you pay back the loan?
Bridging finance for London property can be repaid by either selling or refinancing the property, or by selling or refinancing another asset, as long as there is enough equity to do this.
Alternatively the loan can be repaid through other forms of savings such as pensions, investments or inheritance.
Is there an age limit?
Typically the maximum age limit for bridging finance in London is 85.
In some cases, lenders will accept older applicants if the exit route is solid.
Can ABC Finance help me find the best deal?
Yes, as a whole of market broker with experience of the London property market, we’ll help you find the best bridging loan deal. We’ll assess loan offers and compare the interest rate and set up costs, along with turnaround times for time sensitive deals.
Why work with ABC Finance?
ABC Finance Ltd were founded in the year 2000 and have a wealth of knowledge in arranging property finance in London.
We understand bridging finance and have helped both London based clients and overseas investors secure funding in London.
We work with both bridging loan lenders based in London, and lenders who specialise in lending in London.
Our team of bridging loan advisors are always on hand from initial enquiry, right through to completion and beyond.
Is this type of finance regulated in the UK?
If the loan is secured against your home or a property you plan to live in, the loan is regulated by the FCA. The exception is if the loan is arranged as a second charge to be used for business purposes.
If the loan is a second charge for business purposes or secured against an investment property, the loan is non-regulated, in the same way as a standard buy to let mortgage.
How can I calculate my expected costs?
Calculating your bridging loan costs is simple, especially when using a reputable broker. Here at ABC Finance we’ll calculate the overall costs for you. If you borrow £1m at 0.55%, the interest is £5,500 per month.
The gross loan is the total amount borrowed, including fees and interest for the term of the loan. The net loan is the amount after costs, available to you. The difference between the gross loan and the net loan is how much the loan will cost over the pre-agreed term.
The only things to add are the valuation fees or other fees that are not to be added to the loan.
If the interest is to be paid monthly rather than added to the loan, this must be taken into account. To work out your costs, you can use our bridging loan calculator or speak to one of our advisors.
Bridging loan case studies
Second Charge Bridging Loan Secured for Buy to Let Property Refurbishment
Bridging Loan Secured for HMO conversion and refurbishment
