It is often assumed that bridging finance is a facility restricted exclusively to existing homeowners; however, bridging loans can also be surprisingly flexible, accessible, and affordable options for first-time buyers.

Eligibility for bridging finance is assessed primarily on the borrower’s ability to provide acceptable security for the loan. If you have fixed assets, such as commercial property, residential property, or land, with a combined value that covers the costs of the loan, it is of no consequence whether you currently own a residential property.

When would a first-time buyer consider bridging finance?

Bridging loans differ from conventional mortgages in that they are designed to be repaid in full within a term of between 1 and 18 months. In addition, the funds can be made available within a matter of days, and after the first month, interest is charged on either a monthly or daily basis, typically less than 0.5% per month.

A bridging loan for a property purchase (when repaid promptly) can work out exponentially more cost-effectively than a long-term mortgage.

First-time buyers may consider bridging finance for several scenarios, including:

• To purchase a property at auction at a bargain price
• To buy a non-standard property that major lenders would refuse
• To purchase a ‘fixer-upper’ to subsequently sell at a profit
• To avoid the costs and binding obligations of a mortgage

Where a property is purchased by way of bridging finance, the loan can subsequently be repaid by taking out a conventional mortgage, raising the funds elsewhere, or selling.

How is first-time buyer bridging finance eligibility assessed?

For the most part, bridging finance specialists are primarily interested in the applicant’s ability to cover the costs of the loan with appropriate security. Most lenders exclusively accept residential and commercial properties and land as security.

A check on credit history may also be necessary, in accordance with the chosen lender.

Most important is proof of a viable exit strategy. This means providing the lender with a full disclosure of when and how you intend to repay the loan. For example, by selling the property you purchased and generating a profit,

How much can a first-time buyer borrow?

There are technically no limitations as to how much any applicant can borrow; it all depends on the value of the assets you offer to secure the loan. In most instances, however, bridging finance for property purchase transactions is available for up to 75/80% of the value of the property, depending on the individual circumstances of the applicant.

In all instances, it is advisable to consult with an independent broker at the earliest possible stage in order to ensure you get the best deal. Competitiveness varies enormously from one bridging loan specialist to the next, so it is important to conduct a thorough market search before deciding who to do business with.

For more information on any of the above or to discuss bridging loan applications in more detail, contact a member of the team at Bridgingloans.co.uk today.

Comparing mortgage brokers to bridging specialists is a little like comparing apples to oranges. They both exist for a reason and have their own benefits, but they are nonetheless very different entities.

The popularity of bridging finance continues to grow at its fastest-ever pace. Nevertheless, the vast majority of borrowers in need of sizeable sums for property purchases turn instinctively to mortgage brokers. The problem is that the vast majority of mortgage brokers in the UK lack the knowledge and experience to advise on alternative funding solutions.

In fact, it is estimated that less than 20% of mortgage brokers in the UK have no idea what bridging finance is or its intended applications. Let alone the expertise required to advise on bridging financial options.

The traditional mortgage broker

As the name suggests, a traditional mortgage broker is usually an independent adviser for current and prospective mortgage borrowers. They take into account the requirements and preferences of the applicant, consider their available budget, and scour the market for appropriate mortgage deals. Some work exclusively with major High Street banks, while others also consider loans from specialist lenders across the UK.

However, no allowance is typically made for the consideration of alternative funding solutions. Dozens of conventional mortgage and remortgage products may be analysed, evaluated, and presented to the client, but that’s all. If an entirely different funding solution (such as a bridging loan) represented a better option for the client, a typical mortgage broker may be unable to advise on it accordingly.

Bridging specialists

In a similar vein, alternative funding specialists work closely with major high-street names and independent lenders across the UK. They’re also able to offer comprehensive support and objective advice on all aspects of mortgage borrowing.

The difference is that a bridging specialist can also provide access to an extensive range of alternative funding solutions. From traditional bridging loans and development finance to a variety of accessible and flexible secured borrowing options, there’s far more on the table than traditional mortgages alone.

As a result, the borrower stands a much better chance of finding the perfect funding solution to suit their requirements and budget.

Accessible and affordable

The market for mortgages in the UK has traditionally been somewhat restrictive. In a working example, an individual with a poor credit score or no recent proof of income may be counted out of the running, irrespective of their current financial status.

One of the biggest differences with bridging loans (and other alternative funding solutions) is the consideration of all cases by way of individual merit. So even those who may have been turned down by multiple major High Street names could still access the financial support they need with the help of an independent specialist broker.

For more information on the potential advantages of working with an established bridging specialist, contact UK Property Finance today for an obligation-free consultation.

Within the formal written offer of a bridging loan, the loan is often referred to as a mortgage. The reason for this is that there are many similarities that occur between the two, and in essence, they are basically the same thing.

Bridging loans are secured as a charge on commercial and residential property or land within the UK in the same manner as a mortgage.

Some of the main differences, however, are:

• Bridging loans can be obtained without the requirement to make monthly payments, whereas with a standard mortgage, monthly payments are always required (this does not include an equity release mortgage, which is available only to those over 55). The less stringent income requirements allow bridging loans to be taken by clients who, for whatever reason, cannot show or prove the income needed to make monthly payments. Possible reasons for this lack of income proof could be because the clients are retired and are in the trap of being? cash-poor but asset-rich, the client is self-employed but without proper proof of income, the client has a minimum income, but the reason for the bridging loan will put them in a better financial situation, etc.
• The maximum term of a regulated bridging loan is 12 months (18 months for an unregulated loan), whereas with a mortgage, the standard minimum term is usually 5 years.
• Credit blips can be acceptable for bridging finance, provided a suitable exit route is proved, whereas only very minimal adverse credit is acceptable for mortgage finance, and only with a very small selection of lenders.
• Mortgages are virtually always taken on a 1st charge basis and on one property, whereas bridging finance is much more flexible and can be attained as either a 1st, 2nd, or 3rd charge and on multiple properties if required.
• Bridging finance, in certain circumstances, can be used for the purchase or refinance of partly completed and/or defective properties as well as land with or without planning, whereas a mortgage, with the exception of niche products such as self-build mortgages, is virtually always used for the purchase or refinance of fully habitable properties, which include those having kitchens and bathrooms.
• Bridging finance is often used for a wider range of loan sizes, starting at L10,000 and with no limits, and also for a much wider range of uses and scenarios.

The main consideration of any lender before allowing a client to take out a bridging loan is how the money will be repaid. Only if lenders are fully satisfied that the exit route is genuine and plausible will they allow a loan to commence.