When looking for quick finance at great interest rates, many borrowers opt for a bridging loan due to the speed at which they can be arranged and the flexibility this type of funding offers.
But are there areas in the UK where securing bridging finance is easier than in other parts? We will be looking at the different regions of the UK to see where you are more likely to be accepted for a bridging loan and where it may prove to be more problematic. We will also see how likely it is that lenders will allow prospective buyers to use bridging finance to buy property overseas.
Generally speaking, bridging loans are available in all regions of the UK; however, some lenders will place restrictions and different rules on some areas, including London, Scotland, and Northern Ireland.
Bridging loans in London
Like other major cities in England, such as Manchester, Liverpool, and Birmingham, bridging finance is readily available in London from a multitude of lenders. As there are many bridging loan lenders operating from the capital, borrowers in this area looking for great deals are literally spoilt for choice.
To get the best rates in London and for advice on which bridging finance products best suit your requirements, it is vital that you employ the services of an experienced broker who specialises in London bridging loans. Bridging loan brokers will also have access to lenders that the public does not have, giving a wider choice of options.
Typically, lenders in the UK will cap the LTV at 70%–75% for low-risk deals, which generally applies across England. Most lenders will, however, significantly reduce this figure to between 50% and 65% for high-risk deals. This means that prospective bridging loan borrowers will need to find a 50% to 35% deposit, which can add up to a huge amount of money.
There are lenders that offer 100% LTV, but these are few and far between, and typically there will need to be additional security in the form of other acceptable assets or property, which may result in extra valuation fees.
No matter where you live in England, the key to getting the best bridging loan rates is simply offering the lender the lowest risk factor. So whether you are in Blackpool, Newcastle, or London, you will be assessed on how well you meet the approval criteria.
Each application will be assessed on an individual basis to ensure the borrower meets the lender’s eligibility requirements.
To be successfully accepted, you will need to look at the following:
- A viable exit strategy: An exit strategy is the way a borrower intends to repay the loan at the end of the loan term. No lender will even consider a bridging finance applicant without a strong and workable exit strategy.
When a bridging loan is used for a property purchase, upgrade, or renovation, the typical method of repayment is usually a long-term mortgage product or the sale of the property. The mortgage (or remortgage) or profit from the sale will be used to repay the loan in full. For this reason, it is vital that the lender have confidence in the borrower’s ability to meet this obligation, so you will need to present a realistic exit strategy for the lender to approve your application.
- Experienced in property development: Although experience in property investment and development is not necessarily needed to be accepted for bridging finance, lenders will be more inclined to lend to borrowers who have a proven track record in this area. That’s not to say that lenders will not consider first-time investors, as there are many lenders who specialise in bringing new investors onto the market, but it definitely helps if you have a history of meeting bridging loan repayment obligations.
Lenders may ask for evidence of past projects to ensure that they have been successful prior to approving any application.
- Location: Another factor that will likely be closely looked at is the location of the development or upgrade. The local property market will be taken into account to calculate the viability of selling at a profit and how long it will take to sell. Things such as local schools, transport, and road links will be taken into account when assessing the possible profitability of the project.
- Financial history: As a bridging loan is a type of secured loan, having a perfect credit history is not necessarily a dealbreaker when applying for funding. If your exit strategy is well-thought-out and realistic, then most lenders will consider you, provided that you have sufficient security to cover the loan. However, when it comes to getting the best interest rates and bridging loan deals, borrowers with a clean credit history are more likely to be considered first.
Some lenders will not consider those with bad credit histories, particularly those looking to repay with a mortgage product, or will only offer deals with higher rates due to the increased risk.
Bridging loans in Scotland
If you are looking to finance a project north of the border, you may have to look at specialist lenders, as many lenders will not consider bridging finance in Scotland.
For those that will, there will most certainly be additional restrictions on particular postcode areas. So, for example, it will be more of a struggle to find a lender willing to fund a development in the Scottish Highlands than it would be to be approved for funding for a project in Glasgow.
Lending criteria, rates, and LTV on the Scottish mainland will be comparable to those available in England unless the development has additional complexities, which will most likely affect LTV rates. Land purchases, in particular, are riskier and therefore may have a higher LTV than other projects.
Utilising the services of a specialist bridging loan broker will help you access as many lenders who cover Scotland as possible. Due to the limited number of lenders available who are willing to do this, it is vital that you use a ‘whole of market’ broker to give you the best chance of acceptance. It is especially important to seek advice if you have a history of bad credit.
Bridging loans in Northern Ireland
Much like in Scotland, getting a bridging loan in Northern Ireland can be more problematic as there will be similar restrictions. This is primarily due to the lack of lenders willing to approve projects and developments in this region of the UK. Again, certain postcodes will be excluded as not viable, and you will more than likely be rejected for remote areas as opposed to larger towns and cities.
One way of increasing your chances of finding a lender will be to look at unregulated bridging finance, but it is imperative that you seek professional advice before you apply for this type of loan. You will need to find a ‘Whole of Market’ broker in order to access as many lenders as possible and get the best deal possible.
Bridging finance for overseas properties
It is not impossible to arrange bridging finance for overseas property, but you may struggle to find a lender willing to do this. However, there are a few who will, but they are typically accessed through a specialist broker.
Most lenders will require a substantial asset for security. For example, you could use your UK property as collateral for bridging finance for a property you would like to buy in Australia. The bridging loan could then be repaid using an international mortgage product from a lender who specialises in foreign property purchases or the sale of your UK property, investments, and endowments of inheritance. There will need to be a strong exit strategy for a bridging loan for overseas property in order to be accepted by any lender.
Bridging loans for overseas buy-to-let
There are a limited number of specialist lenders who will allow funds to be approved for borrowers looking to buy property abroad with the sole intention of letting them out. As with most buy-to-let investments, the LTV will usually be around 75% at the most, and the valuation of the property will be important to achieving acceptance.
Bridging loans overseas for limited companies
Bridging finance to fund property purchases outside the UK is not limited to individuals but can also be accessed by limited liability companies. There are specialist lenders who will consider applications, provided the eligibility criteria are met. This type of loan is treated similarly to an overseas buy-to-let, but personal guarantees by the company directors may be required. Although not always needed, an SPV (special purpose vehicle) could improve your chances and get you a better deal.