Bridging Loans For First Time Buyers

First time buyer bridging loan rates & costs

What rate will I pay?

Rates start at 0.43% per month, with rates of 0.48-0.65% being common for loans between 50-75% loan to value.

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:

Lender arrangement fee – The lender arrangement fee is charged based on the loan amount and usually costs 1-2% of the loan amount. Larger 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.

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.

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?

A broker’s job is to find the most suitable product for your needs and to work with you throughout the process. Some lenders are happy to work directly with applicants, especially on applications where the borrower won’t be residing in the security property.

Whether you choose to work with a broker or directly with a lender is down to individual preference. For first-time buyers, the bridge loan process can be difficult to navigate, so there may be additional benefits to working with an experienced advisor.

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.

FAQs

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.

Can a first-time buyer buy a commercial property?

Yes, commercial and semi-commercial properties aren’t a problem, although it would require a slightly different product. In this case, a commercial bridging loan would be needed and the you would need to meet the criteria for that product.