Bridging Loans – How Much Can I Borrow?

When looking to take on a property transaction using a bridging loan, knowing how much you can borrow is not always straightforward.

The difference between your net loan and the transaction value will dictate your bridging loan deposit.

In this guide we break down how to calculate how much you can borrow, the key parameters for different loan types and things that could impact your borrowing capacity.

How to work out your maximum borrowing potential

The easiest way to work out your borrowing potential is by using our bridging loan calculator.

This will help you to calculate your interest costs, fees and how much difference you will see between your gross and net loan amounts.

The key criteria points that calculate maximum borrowing

The main criteria points that impact your maximum borrowing potential are the property type offered as collateral for the loan and your exit strategy.

Here’s how they impact things:

Security property

The type and condition of the property will impact the maximum loan to value offered by bridging loan lenders.

For example, it’s possible to borrow more money at a higher loan to value (LTV) against a £1m residential property than a £1m commercial property.

Exit strategy

What you plan to do with the security property during the loan term and your exit strategy all play an important role in determining your maximum borrowing potential using a bridging loan.

Your exit strategy is how you plan to repay the loan. It is key in determining your maximum loan, as your chosen method will determine how much money this exit strategy is likely to raise.

For example, if your property is valued at £500,000, selling it would raise £500,000. Conversely, if you planned to refinance it to a buy to let mortgage, you may raise 75% of this figure – £375,000.

For this reason, your lender will want to ensure that they don’t lend you more money than you’ll be able to repay using your chosen exit strategy.

Keep reading – Bridging loan agreement in principle or bridging loan broker.

Maximum borrowing parameters for different loan types

Different types of loan have different maximum lending rules. Here are some of the key types:

Loan Type	Maximum LTV	Deposit required
Regulated bridging loans	75% LTV	From 25%
Unregulated bridging loans	90% LTV	From 10%
Commercial bridging loans	75% LTV	From 25%
Development exit finance	80% LTV	From 20%
Below market value bridging finance	100% of purchase price	Potentially none
Property refurbishment finance	90% LTV	From 10%

Things that could impact your borrowing potential

While the rules above work as a general rule of thumb, there are still factors that could impact your maximum borrowing potential. They are:

Credit history

While we can still offer bad credit bridging loans for borrowers with a poor credit history, you may see a reduction in the loan to value offered.

This drop in maximum borrowing operates on a sliding scale depending on the level of adverse credit you have.

A few missed payments isn’t likely to be a massive issue, while a recent bankruptcy would be likely to have a significant impact.

A lack of experience

While this doesn’t impact every type of bridging loan, experience can be extremely important for some types, especially those that require specialist skills, like property development.

When developing a property, especially when undertaking structural work, your application may be viewed more favourably if you’re employing an experienced team.

A property in a very poor state of repair

A property that’s in a very poor state of repair may limit your maximum LTV.

This is because the sale price is less predictable, as there is lower demand for properties that require significant amounts of work compared to those in good condition.

Read more – Bridging loan advice or Can a bridging loan affect your mortgage application.

Ways to boost your borrowing potential

The easiest way to boost your borrowing potential is to offer additional security over another property, if you have one.

This will allow you to calculate the maximum LTV against the total of both properties’ values, rather than just the one you’re buying.

Maximise your borrowing capacity with ABC Finance

At ABC Finance, we’ve been arranging bridging loans since the year 2000.

We work with the leading lenders in the market to secure the best deals for our clients. If you want to get the best deal, whether that’s a fast bridging loan completion or the lowest bridging loan costs, get in touch now, and we can help.