Regulated Bridging Loans

Key product features

When is a bridging loan suitable?

A bridging loan is suitable when you’re looking to raise funds quickly, or where you’re looking to purchase a property before selling your existing one.

Common uses include:

• To repair a chain break – They’re often used as a form of chain break finance to secure funds quickly, borrowing against both your existing residential property and the new one.
• To complete a fast property purchase – If you’ve purchased a property and need to raise funds quickly, for example, if you’ve been let down by your mortgage lender, or you’ve purchased a property at auction and a traditional mortgage would take too long to complete. In this case, you would use auction finance.
• You’re purchasing a property that needs refurbishment – Bridging finance is often used to renovate property before refinancing it to a longer term loan or selling it. This is known as property refurbishment finance.
• To prevent repossession – If you’re facing repossession, bridging finance can be used to refinance your home before either remortgaging to a new deal, or selling the property. This approach is often used by those who plan to ultimately sell as a way to ensure they achieve the full market value on sale.
• Funding care fees – when moving into a care home, many providers require a number of months care home fees upfront. This can be out of reach for many and can mean moving to a less desirable care home. Bridging finance can be used to release equity for the fees, giving you a greater choice of homes.

In these situations, FCA regulated loans can be used as a short-term loan used to “bridge the gap”.

How much does bridging cost?

This varies case by case and depends on client circumstances however bridging loans regulated by the FCA cost between £550 to £850 per month per £100,000 borrowed.

This equals an interest rate of 0.55-0.85% per month for most applications. Commercial property applications can cost slightly more.

On top of the interest charged, you can expect to pay an arrangement fee, which is usually 1-2% of the amount borrowed.

The interest rate and arrangement fees charged depend on the loan size, LTV, your credit history and the strength of your application.

How much can I borrow?

We can offer loans from £10,000 with no defined maximum.

The things that will impact your maximum lending are the loan-to-value (LTV) and credit history. LTV is the amount you are borrowing as a percentage of the value of property offered. An example is a loan of £75,000 against a value of £100,000 is 75% LTV.

As a borrower, ensuring a thorough valuation of the property is key (if an automated valuation, or AVM, can’t be used on a residential property), as it directly influences the loan-to-value ratio, lending amount, interest rate and the terms of the bridge loan offered by the lender.

Are there any upfront fees?

We don’t charge upfront broker fees. Some lenders will require the borrower to make a payment for a valuation and a solicitor’s legal undertaking, both of these fees are payable before completion of the loan.

There are bridging options with no upfront fees however you may pay a higher interest interest rate.

Do I have to pay the interest each month?

No, under FCA guidelines the bridging interest on regulated loans must be added to the loan, otherwise known as retained, rather than paid monthly.

Try our – bridging loan calculator.

How much deposit is required?

Our max LTV for regulated loans is 75% gross, meaning you must have 25% deposit or equity in the deal, plus any fees and interest.

Where loans are being taken over more than one property, your LTV is calculated over both properties, meaning you can borrow a total of 75% of the combined value of both properties.

First charge versus second charge bridging lending

The difference is that first charge bridging gives the chosen lender first charge on the property used as security. If you are purchasing a property and using this as security, the lender will always take first charge against this.

A regulated second charge bridging loan means that you already have a first charge, typically a residential mortgage, which will remain in place. In this instance, the bridge lender will sit behind the first charge lender and take the 2nd charge.

Second charges lenders tend to charge slightly more as there is more risk for the lender. Upon sale, the first charge lender gets their money back first, the second charge provider then receive their funds.

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How long can I borrow the money for?

Regulated bridging is available from 1 day, with a full months’ interest payable to a maximum term of 12 months. This is governed by FCA rules, so longer terms are not available for this type of residential borrowing.

If for example to repay the loan you will sell the property, it needs to be sold within the 12 month period. In this case, you should allow for sales falling through and buyers in chains etc. therefore it’s worth marketing sooner rather than later.

As a guide, non-regulated products (for example, those used for property refurbishment) can be taken for longer, often up to 18 months, or even 36 months in some cases.

What happens if the loan is repaid early?

As the interest is added to the facility upfront, when loans are repaid early you will receive a refund of the ‘unused’ interest.

Some bridging lenders have exit fees, minimum interest terms and monthly or daily interest calculations. We can tailor this to suit you.

What if I am unable to repay within 12 months?

This is a question we get asked regularly. The main piece of advice here is that communication is key, lenders like to be regularly updated if there are issues. If the lender is aware of delays in advance of the term ending, they are more likely to be flexible with you.

If for example you are selling the property to repay the loan, you should consider whether the asking price is reasonable to achieve a sale within the 12 months.

Taking possession of the property is a last resort therefore most funders are happy to work with you to find a resolution.

Do I need an exit strategy in place such as a sale or mortgage?

Yes, as part of responsible lending, you are required to have a repayment exit plan in place on all regulated loans. This is usually either sale of a property or a refinance to residential mortgages.

Alternative exits such as inheritance, sale of a business, corporation or other assets are commonly acceptable.

Who can borrow?

Whether you’re a private individual, limited company, group structures or a trust etc., we can help.

We have bridging lenders who have no minimum earning requirements, allow bad credit and are flexible in other aspects.

If you would like to know more or have a special request, please speak with one of our bridging advisors.

We have experience with almost all borrower types including SIPPS, partnerships, Limited Companies, corporate lending and individuals.

Will I qualify if I have bad credit?

Yes, people with adverse credit deserve a second chance and we do offer bridging to borrowers with a poor credit history.

We offer a specialist range of bad credit bridging loans for borrowers in this situation. If you’re worried about whether you qualify, get in touch to talk through your circumstances with our experts. They will be able to quickly inform you whether we can offer a suitable product.

We have lenders that will consider various levels of adverse credit to include things like missed payments, CCJ’s, defaults and mortgage arrears.

What information do you require?

This depends on the chosen lender but typically the following:

• A bridging application form (which is usually completed online)
• Evidence of income and any other earnings (such as income from buy-to-let or other investments)
• 3 months statements
• ID such as a passport copy or driving licence

If you are unable to provide certain information please let us know upfront and we’ll do our best to work around the issue.

How long does it take?

From when we submit your bridging application to completion can take anywhere from a few days to over a month.

Different bridging providers have different SLA’s therefore if speed is important, we’ll ensure that you are placed with a lender to suit this.

What types of property do you lend against?

We can offer loans against various property types to include residential, commercial including semi-commercial, barns, land and even park homes.  Basically, if the property can’t be towed away we should be able to help! The property doesn’t need to be mortgageable, it doesn’t even need to be wind or watertight.

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