Bridging Loan Criteria
The bridging loan market is vast, which means what the lender has to offer, their criteria and eligibility vary greatly between them all. UK Property Finance are a whole of market broker when it comes to bridging loans so it is hugely beneficial to speak to a member of the team who can help streamline the best lenders available based on your individual circumstances.
Loan sizes
The minimum loan size for a bridging loan is £25,000, however majority of lenders start from £50,000.
Loans can be issued up to 75% loan to value, and in some circumstances where refurbishment is involved there are lenders who can raise up to 85% loan to value. You can secure against almost any type of property and the funds can be raised for any legal purpose.
Completion times vary between lenders, however if everyone involved are responsive on the case, the loan can complete in as little as 5 working days.
Term
The maximum term is 12 months with majority of lenders; however, some can go up to 18 months.
If the loan is regulated by the FCA the term is restricted to a maximum of 12 months.
Lenders typically have a 1-month minimum term, but after this there are usually no early repayment charges, and you are only charged interest for the time you have the loan outstanding for.
Security
A bridging loan is always secured against a property. The loan can be against one property or multiple properties if required. The bridging loan lender will take a charge on any property they secure against; this could be a first or a second charge in most circumstances. Depending on the lender criteria, a third charge could be possible.
Property types that can be considered as security:
- Residential property
- Buy to let property
- HMO/multi-unit freehold blocks
- Holiday lets
- Semi commercial/mixed use
- Commercial properties
Property
Bridging loans are particular useful when a property is not habitable meaning it is not possible to secure a mortgage against it. Lenders are much more flexible when it comes to the current condition of the property, whether you are looking to make improvements to get the property in a mortgageable condition or if you are just looking to increase the value in order to sell at a greater value.
Lenders can secure against properties in the following locations:
- England
- Scotland
- Wales
- Northern Ireland (investment properties only)
The bridging loan terms differ depending on the property location and current property condition.
Credit history
Although the lender will be securing against a property, the credit file of an applicant will be taken into consideration. All lenders have a different approach when it comes to any current or historic adverse credit. That being said, bridging lenders are much more flexible in comparison to mortgage lenders on what they accept. This is due to the loan being predominantly asset based, so as long as there is an exit strategy in place to repay the loan a lender can be sourced in most circumstances.
Adverse credit that can be considered:
- CCJ’s
- Defaults
- Bankruptcy
- Repossessions
- Arrears
- IVA’s
Income evidence
Bridging loans are asset based however for compliance purposes lenders may still ask for income evidence. Where you plan to sell the property to repay the loan, lenders can be more lenient with income requirements, however where the exit strategy is re-mortgage, the lender will need to see what your financial circumstances are to ensure a mortgage will be possible to repay the loan.
The interest is usually retained on a bridging loan meaning no monthly payments are required, however in the event that you opt for serviced interest, lenders will accept this subject to affordability to ensure those interest payments can be made.
