Bridging Loans For First Time Buyers

If you’re a first time buyer who is looking to apply for bridging finance, read this guide and find out how to get the best deal

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Buying your first property with a bridging loan is not the path that most first-time buyers take. But for budding property professionals or those that have found a bargain property, it can make sense.

In this guide, we break down what a bridging loan is, how you can get one and the costs that you will face.

Read on to find out more, or get in touch for free, expert advice.

First time buyer bridging loans explained

What is a first-time buyer bridging loan?

Bridging loans, also known as bridging finance, are a short-term loan, secured against property. They are designed as a tool to bridge the gap between 2 events, for instance, purchasing a property and securing a mortgage.

How can bridging finance help a first-time buyer?

There are a number of reasons why a first-time buyer may need to consider borrowing via short-term bridging loan as opposed to applying for a mortgage. The main ones are as follows:

To complete a new property investment that couldn’t be funded using a mortgage.
To buy and refurbish a property before taking out a mortgage or selling the property.
To invest in a new property below market value.
To complete the purchase of a property bought at auction through auction finance.

Key product features

Key Features

Max LTV

Up to 90%

Interest rate

From 0.39% 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)

First time buyer bridging finance criteria

Who will qualify for a FTB bridging loan?

We can look to fund most applicants, as long as they have sufficient deposit and a strong exit strategy.

We can lend to individuals, partnerships, LLPs, Ltd companies, offshore companies and pension funds.

Can you lend to borrowers with adverse credit?

Yes, lending to borrowers with bad credit isn’t usually an issue – as long as your credit history doesn’t affect your exit strategy.

How will my application be assessed?

Bridging loan lenders assess applications based on two main factors – the security property offered and your chosen exit strategy.

How much can I borrow?

Loan sizes

We can offer loans from £10,000 with no set maximum loan size.

What is your maximum loan to value (LTV)?

The maximum loan to value that we can offer is 90% for auction purchases, although this is very rare and comes with very high interest rates.

We can offer up to 100% of the purchase price for a below market value bridging loan.

At 80% LTV on a purchase, we can offer more reasonable rates, with loans at 75% LTV and below seeing the rates offered begin to drop sharply.

When you’re looking to undertake a refurbishment project, we may also be able to provide the funds needed to undertake the works on the property.

How your exit strategy affects your maximum loan

The amount of bridging finance available will be limited by your chosen exit strategy and perceived ability to meet the repayment plan. When looking to refinance to a new lender to repay the bridging loan, you will be asked to provide an agreement in principle from your new lender.

Where this is the case, your maximum loan will usually be limited by the amount available according to your agreement in principle.

First time buyer bridging loan rates & costs

What rate will I pay?

Rates start at 0.39% per month, with rates of 0.55-0.75% being common for loans between 50-75% loan to value.

The bridging loan rates that you pay will be impacted by your loan to value and the type of loan that you require. For example, the rates on residential bridging loans are lower than those on commercial bridging loans.

Are there any other fees to pay?

In addition to the interest charged, there are a number of fees that must be paid during the application process. They are the following:

Legal fees – These fees are usually charged post offer, in two parts. The first is a part payment to begin work, with the remainder usually payable when the loan completes. It’s common for the borrower to pay both their own, and the lenders legal expenses when taking out bridging finance.

Lender arrangement fee – The lender arrangement fee is charged based on the loan amount and usually costs 1-2% of the loan amount. Large bridging loans tend to benefit from lower fees in percentage terms. This fee is charged on completion of the loan and can usually be added to the loan.

Lender exit fee – Some lenders charge an exit fee when the loan is repaid, although this is becoming less common. Where possible, we avoid using lenders who charge additional exit fees, unless they are the cheapest product overall.

Broker fees – Some brokers charge a fee for using their service, often 1-1.5% of the loan amount. We don’t charge any fees for arranging a bridging loan.

Valuation fees – These fees are due where an automated valuation (AVM) can’t be used (usually on higher LTV applications or those where an AVM isn’t possible). The fee covers the cost of having a chartered surveyor of the lender’s choice visit the property and undertake an inspection before producing a report on it.

How to get a first-time buyer bridging loan

Who offers first-time buyers bridging finance?

Many, but not all bridging loan lenders will accept applications from first-time buyers. In many cases, context is key, so for a lender to consider an application from a first-time buyer, they will want to be sure that the transaction makes sense.

As such, they may delve a little deeper into the transaction to ensure that they aren’t putting the borrower into a high-risk situation.

Should I go direct to a lender or use a broker?

It’s best to use a broker in most cases as a first time buyer.

As a first time buyer, it’s a good idea to have an experienced professional in your corner to ensure things run smoothly.

What information will I have to provide?

Bridging loan lenders will need to know some basic information about you, which is usually taken down using an application form. In addition, you will usually be required to provide the following:

Proof of ID and residence
Proof of any deposit
Details of your exit strategy

You may also be asked to prove your income, where you plan to exit your bridging loan by refinancing to a new lender.

For property refurbishment finance, you will also have to provide detail on the works you plan on undertaking, the costs of works and timescales for its completion. You can learn more about this in our guide on bridging finance for property developers.

Can I live in the property once I’ve bought it?

Yes, this is possible, but when planning to live in the property after purchase, you would need to take out a regulated bridging loan.

Where the property is being bought as an investment, the loan would not be regulated by the Financial Conduct Authority (FCA) and as such, an unregulated bridging loan would be the correct product.