Question 1

What exactly is a bridging loan and how does it work?

Accepted Answer

A bridging loan is short-term secured finance (typically 1-18 months) that 'bridges' a gap in your finances. You borrow against property as security, use the funds for your immediate need, then repay when your longer-term solution completes. For example, you might borrow to buy a new home before selling your current one, then repay when your sale completes. Interest is usually rolled up and paid at the end rather than monthly.

Question 2

Who typically uses bridging loans?

Accepted Answer

Bridging loans suit anyone needing fast property finance where mortgages are too slow or unavailable. Common users include: auction buyers who must complete in 28 days, homeowners buying before selling to avoid losing a property, property developers funding refurbishments, landlords expanding portfolios quickly, and business owners releasing equity for opportunities. Both individuals and companies use bridging finance.

Question 3

What can I use a bridging loan for?

Accepted Answer

Bridging loans fund almost any property-related purpose: purchasing property at auction, buying a new home before selling yours, funding refurbishment or conversion projects, releasing equity for business needs or tax bills, completing probate property sales, breaking property chains, purchasing unmortgageable properties to renovate, and covering short-term cash flow gaps secured against property.

Question 4

What is an exit strategy and why does it matter?

Accepted Answer

An exit strategy is your plan for repaying the bridging loan. Lenders require this because bridging is short-term finance. Common exits include: selling the property, refinancing to a mortgage, selling another asset, or receiving expected funds (inheritance, business sale). Your exit must be realistic and achievable within the loan term. A weak exit strategy is the main reason applications get declined.

Question 5

How is bridging loan interest calculated?

Accepted Answer

Bridging interest is quoted monthly (e.g., 0.75% per month) rather than annually like mortgages. On a £300,000 loan at 0.75% monthly, you'd pay £2,250 per month in interest. Over 6 months, that's £13,500. Interest can be: rolled up (added to loan, paid at end), retained (deducted upfront from loan), or serviced (paid monthly). Most borrowers choose rolled up to avoid monthly payments.

Question 6

What's the difference between regulated and unregulated bridging?

Accepted Answer

Regulated bridging loans are overseen by the FCA and apply when you or a family member will live in the property. They have more consumer protections but fewer lender options and longer processing. Unregulated bridging is for investment or business purposes - it's faster with more lenders but fewer protections. You don't choose which type; it's determined by how you'll use the property.

Question 7

Do I need a solicitor for a bridging loan?

Accepted Answer

Yes, you'll need a solicitor experienced in bridging finance. They handle the legal work including property searches, title checks, and charge registration. The lender also appoints their own solicitor. Using a solicitor familiar with bridging speeds up completion significantly - some standard conveyancers struggle with the pace required. Expect to pay £1,000-£2,500 in legal fees.

Question 8

What are current bridging loan interest rates?

Accepted Answer

Bridging rates currently range from 0.44% to 1.5% per month depending on your circumstances. Prime rates (0.44-0.65% monthly) are for straightforward residential cases with low LTV and clean credit. Standard rates (0.65-0.95%) cover most applications. Higher rates (0.95-1.5%) apply to complex cases, adverse credit, or unusual properties. Rates have become more competitive as more lenders enter the market.

Question 9

What fees are involved in a bridging loan?

Accepted Answer

Typical bridging loan fees include: arrangement fee (1-2% of loan), valuation fee (£300-£2,000+ depending on property), lender legal fees (£800-£1,500), your solicitor fees (£1,000-£2,500), and potentially broker fees (0.5-1% or included in arrangement fee). Some lenders charge exit fees (0.5-1%) or admin fees. Always ask for a full cost breakdown before committing.

Question 10

What's the total cost of a bridging loan?

Accepted Answer

Total costs depend on loan size, term, and rate. Example: £300,000 loan for 6 months at 0.75% monthly with 1.5% arrangement fee costs approximately: £13,500 interest + £4,500 arrangement fee + £3,000 legal fees + £500 valuation = £21,500 total. That's about 7.2% of the loan amount. Shorter terms cost less in total even with the same monthly rate.

Question 11

What's the difference between rolled up, retained, and serviced interest?

Accepted Answer

These are three ways to pay bridging interest. Rolled up: interest accumulates and is paid with the loan at the end - most common as it means no monthly payments. Retained: interest for the full term is deducted from your loan upfront, reducing net funds received but guaranteeing no further interest payments. Serviced: you pay interest monthly like a mortgage - rare for bridging as most borrowers want to avoid ongoing payments.

Question 12

Are there early repayment charges on bridging loans?

Accepted Answer

This varies significantly between lenders. Some charge no early repayment penalties at all. Others require a minimum interest period (typically 1-3 months) regardless of when you repay. Some charge 1-3 months' interest as an early exit fee. Always check the early repayment terms before committing - if you might repay quickly, find a lender with no or low ERCs.

Question 13

Can arrangement fees be added to the loan?

Accepted Answer

Yes, most lenders allow arrangement fees to be added to the loan rather than paid upfront. This increases your total borrowing and interest costs but reduces the cash you need at completion. It's useful when you need to maximise funds for your purchase or project. Just remember you'll pay interest on the added fee amount.

Question 14

Why do bridging rates vary so much between lenders?

Accepted Answer

Rates vary based on each lender's risk appetite, funding costs, and target market. Some lenders focus on prime, low-risk cases and offer low rates. Others specialise in complex or adverse credit cases and charge more for the additional risk. Property type, location, LTV, borrower experience, and exit strategy strength all affect what rate you're offered. Comparing multiple lenders is essential.

Question 15

Is bridging finance more expensive than a mortgage?

Accepted Answer

Yes, significantly more expensive in monthly terms - bridging rates of 0.5-1.5% monthly translate to 6-18% annually versus 4-6% for mortgages. However, bridging serves different purposes: you use it for months, not years. A 6-month bridging loan costing £15,000 might save you losing a £50,000 deposit or missing a property deal. The cost is justified by the speed and flexibility.

Question 16

What credit score do I need for a bridging loan?

Accepted Answer

Unlike mortgages, bridging lenders focus primarily on the property value and exit strategy rather than credit score. Many borrowers with poor credit successfully obtain bridging finance. However, adverse credit typically means higher rates (0.85-1.5% monthly) and lower LTV limits (60-70%). Recent CCJs, defaults, or bankruptcy don't automatically disqualify you, but they affect terms offered.

Question 17

Can I get a bridging loan with CCJs or defaults?

Accepted Answer

Yes, specialist lenders cater specifically to borrowers with CCJs, defaults, missed payments, and other credit issues. The key factors are: sufficient equity in your property, a viable exit strategy, and the age/size of the adverse credit. Recent or large CCJs may limit options, but older, smaller issues are often overlooked. Expect rates of 0.95-1.3% monthly for adverse credit cases.

Question 18

Do I need to prove my income for a bridging loan?

Accepted Answer

Generally no, not in the way mortgages require. Bridging is asset-based lending - the focus is on property value and exit strategy. Most lenders don't require income verification, payslips, or accounts. However, some regulated bridging loans (for properties you'll live in) may have affordability assessments. For unregulated investment bridging, income documentation is rarely needed.

Question 19

Can self-employed people get bridging loans?

Accepted Answer

Absolutely. Bridging loans are ideal for self-employed borrowers because they don't require the 2-3 years of accounts that mortgages demand. Since lending decisions are based on property value and exit strategy rather than income, being self-employed isn't a barrier. Many property investors and developers are self-employed and regularly use bridging finance.

Question 20

What property types can be used for bridging loans?

Accepted Answer

Most property types qualify: standard residential houses and flats, HMOs, commercial premises, mixed-use buildings, land with planning permission, development sites, auction properties needing work, and even some unusual properties like ex-local authority or non-standard construction. Properties in very poor condition or with legal issues may have limited options but aren't impossible.

Question 21

Can non-UK residents get UK bridging loans?

Accepted Answer

Yes, but with restrictions. Overseas investors and expats can obtain UK bridging loans from specialist lenders. Requirements typically include: UK property as security, clear exit strategy, UK-based solicitor, and often a UK bank account. LTV is usually capped at 65-70% for non-residents. Rates may be 0.1-0.3% higher monthly than for UK residents.

Question 22

What's the minimum and maximum bridging loan amount?

Accepted Answer

Minimum loans typically start at £25,000-£100,000 depending on the lender. Maximum amounts can reach £25 million or more for the right property and borrower. Most lenders comfortably handle loans from £150,000 to £5 million. Very large loans (£10m+) require specialist lenders and typically more stringent requirements.

Question 23

What LTV can I get on a bridging loan?

Accepted Answer

Standard bridging loans offer up to 70-75% LTV. Some lenders go to 80% for strong cases. With additional security (another property), you can reach 85-90% of the primary property's value. LTV affects your rate - lower LTV means better rates. Commercial properties typically max out at 65-70% LTV, while residential can go higher.

Question 24

How quickly can a bridging loan complete?

Accepted Answer

The fastest bridging completions happen in 5-7 working days for straightforward cases with documents ready, clean title, and efficient solicitors. More typically, expect 2-3 weeks. Complex cases with issues to resolve take 4-6 weeks. The key factors affecting speed are: your document readiness, valuation method, property complexity, and how quickly solicitors work.

Question 25

Can I get a bridging loan decision in 24 hours?

Accepted Answer

Yes, many lenders provide decisions in principle within 24 hours, some within hours. This initial decision confirms they're willing to lend subject to valuation and legal checks. Full formal approval follows the valuation. Completion then depends on legal work, which is where most delays occur. A 24-hour decision doesn't mean 24-hour funds.

Question 26

What documents do I need for a bridging loan?

Accepted Answer

Typical requirements include: photo ID (passport/driving licence), proof of address (utility bill/bank statement), property details and title information, details of your exit strategy, any existing mortgage statements, and for companies, company documents and accounts. Having documents ready before applying significantly speeds up the process.

Question 27

What happens during the bridging loan valuation?

Accepted Answer

The lender instructs a RICS surveyor to value the property. For straightforward residential properties at lower LTV, desktop or drive-by valuations may be accepted - these are faster. Physical valuations involve a surveyor visiting and typically take 3-7 days to complete and report. The valuation confirms the property's worth and any issues affecting lending.

Question 28

What can delay a bridging loan?

Accepted Answer

Common delays include: missing or incomplete documents, title issues discovered in legal searches, valuation discrepancies or concerns, planning or building regulation questions, existing lender taking time to provide redemption figures, and slow solicitors. You can minimize delays by preparing documents upfront, using experienced bridging solicitors, and being responsive to information requests.

Question 29

What's the bridging loan application process?

Accepted Answer

The typical process: 1) Initial enquiry and indicative terms, 2) Formal application with documents, 3) Lender reviews and issues offer in principle, 4) Valuation instructed and completed, 5) Legal work begins (searches, title review), 6) Formal offer issued, 7) You accept and sign loan documents, 8) Completion and funds released. Steps 3-8 typically take 2-4 weeks.

Question 30

How do bridging loans work for auction purchases?

Accepted Answer

When you buy at auction, you exchange contracts immediately and must complete within 28 days - too fast for mortgages. Bridging completes in 7-14 days, giving you time to spare. You arrange bridging before the auction (getting an agreement in principle), bid with confidence, then complete the bridging process if successful. Your exit is typically refinancing to a mortgage or selling the property.

Question 31

Should I arrange bridging finance before or after the auction?

Accepted Answer

Arrange it before. Get an agreement in principle on the property you're interested in (provide the auction legal pack to the lender). This confirms funding is available and at what terms. Then bid confidently knowing finance is ready. Waiting until after winning risks discovering problems with the property that affect lending, leaving you unable to complete.

Question 32

What if the auction property needs work - can I still get bridging?

Accepted Answer

Yes, many auction properties need renovation, which is why they're at auction rather than sold traditionally. Bridging lenders are comfortable with properties needing work - they value based on current condition. Some offer additional funds for renovation released in stages. The key is having a realistic plan for the work and viable exit strategy after completion.

Question 33

What deposit do I need for an auction property?

Accepted Answer

You need 10% of the purchase price as a deposit on auction day, paid immediately if you win. Then you need enough equity/cash to cover the remaining deposit beyond your bridging loan. If you're borrowing 70% LTV, you need 30% total - so 10% on the day plus another 20% at completion. Some lenders offer higher LTV reducing your cash requirement.

Question 34

How can bridging loans break a property chain?

Accepted Answer

If you've found your dream home but haven't sold yours yet, bridging lets you buy now without waiting. You borrow against your current property's equity, purchase the new home, then sell your original property without time pressure. When it sells, you repay the bridging loan. This eliminates chain dependency and makes you a more attractive buyer.

Question 35

What if my buyer pulls out after I've exchanged on my new home?

Accepted Answer

This is a classic bridging scenario. You've exchanged on your purchase so must complete, but your sale has fallen through. Bridging lets you complete your purchase while you find a new buyer. You borrow against your existing property, complete the new purchase, then repay when you eventually sell. It prevents you losing your deposit or the property.

Question 36

Can I use bridging to avoid being gazumped?

Accepted Answer

Yes. If you're worried about losing a property to a faster buyer, bridging lets you move quickly. You can proceed without waiting for your current sale, making you chain-free and more competitive. Some sellers accept lower offers from chain-free buyers because of the certainty. Bridging effectively lets you act like a cash buyer.

Question 37

Can bridging loans cover both purchase and renovation costs?

Accepted Answer

Yes. Many bridging lenders offer 'refurbishment bridging' that includes funds for works. Typically, the purchase completes with initial funds, then renovation money is released in stages as work progresses. Some lenders release funds against invoices, others after inspections. This helps manage cash flow through the project without needing separate funding.

Question 38

What's the difference between light and heavy refurbishment bridging?

Accepted Answer

Light refurbishment covers cosmetic work without structural changes or planning permission - new kitchen, bathroom, redecoration, new flooring. Most bridging lenders handle this easily. Heavy refurbishment involves structural work, extensions, or change of use - this needs specialist refurbishment or development finance with staged drawdowns and typically costs more.

Question 39

How is bridging different from development finance?

Accepted Answer

Bridging is for purchasing and light refurbishment, typically completing in one draw. Development finance is for ground-up construction or major works, released in stages as construction progresses with regular inspections. Development finance terms are usually longer and more complex. Use bridging for buying and light works; development finance for substantial building projects.

Question 40

Can I get bridging for unmortgageable properties?

Accepted Answer

Yes, this is a core bridging use case. Properties that are unmortgageable due to condition, lack of facilities, structural issues, or other problems can usually get bridging finance. Lenders value the property in current condition and assess your plans to make it mortgageable. Once renovated, you refinance to a mortgage as your exit. Many investors use this strategy.

Question 41

What's a first charge vs second charge bridging loan?

Accepted Answer

A first charge means the bridging lender has first claim on the property if you default - they're the primary secured creditor. A second charge sits behind an existing mortgage - that lender gets paid first, then the bridging lender. Second charges let you access equity without remortgaging but typically have higher rates. Your existing lender must consent to a second charge.

Question 42

Can I have a bridging loan on a property I already own?

Accepted Answer

Yes, this is called equity release bridging or a bridging loan on existing property. You borrow against equity in property you own, secured as either first charge (if no existing mortgage) or second charge (behind your mortgage). Common uses include raising funds for another purchase, business needs, or paying tax bills. Your exit is typically selling the property or refinancing.

Question 43

What is cross-collateralisation in bridging?

Accepted Answer

Cross-collateralisation means securing a bridging loan against multiple properties. For example, you might offer your existing home plus the property you're buying as combined security. This can achieve higher LTV on the purchase property or access larger loans. It's useful when one property alone doesn't provide enough security for your needs.

Question 44

What happens if I can't repay my bridging loan on time?

Accepted Answer

First, communicate with your lender early if you foresee problems. Options include: extending the loan term (usually possible with additional fees), refinancing to another bridging loan, or adjusting your exit strategy. If you simply can't repay, the lender can ultimately repossess and sell the property. This is rare - lenders prefer working with borrowers to find solutions.

Question 45

Can I extend a bridging loan if I need more time?

Accepted Answer

Most bridging loans can be extended, though terms vary. Expect to pay an extension fee (often 1% of the loan) and continue paying interest. Extensions are usually granted if your exit remains viable, just delayed. Apply for extension before your term expires. Repeatedly extending suggests your exit strategy isn't working and may cause lender concern.

Question 46

What's an AVM valuation and when is it used?

Accepted Answer

An Automated Valuation Model (AVM) uses algorithms and property data to estimate value without a physical inspection. AVMs are fast (often same-day) and cheaper than physical valuations. They're used for standard residential properties at lower LTV where risk is manageable. Higher LTV, commercial, or unusual properties typically require physical valuations for accuracy.

Question 47

Bridging loan vs personal loan - which is better?

Accepted Answer

They serve different purposes. Personal loans are unsecured, smaller (typically up to £25,000), and based on income. Bridging loans are secured against property, much larger (£100k-£25m+), and based on asset value. For property purchases or significant funds, bridging is appropriate. For smaller amounts not needing property security, personal loans may work. Bridging is always for property-related needs.

Question 48

Should I use a bridging loan or remortgage?

Accepted Answer

Remortgaging is cheaper but slow (4-8 weeks typically). Use remortgage when you have time and want long-term funds at low rates. Use bridging when speed is essential, you need short-term funds, or you can't currently get a mortgage (property condition, credit issues). Many people bridge short-term then remortgage once the immediate need is resolved.

Question 49

Is bridging better than a mortgage for buy-to-let?

Accepted Answer

For standard BTL purchases where you have time, a BTL mortgage is cheaper. Use bridging for BTL when: buying at auction, the property needs work before it's mortgageable, you need to act faster than mortgage timelines allow, or you're buying from someone requiring quick completion. Many investors bridge to purchase, then refinance to BTL mortgage.

Question 50

Can I get a bridging loan during divorce proceedings?

Accepted Answer

Yes, bridging loans can help with divorce property situations. Common uses include: one party buying out the other's share, funding a new property purchase before the marital home sells, or releasing equity to settle financial agreements. Lenders need clear evidence of how the loan will be repaid, often from the eventual property sale or settlement.

Bridging Loan Questions & Answers

What exactly is a bridging loan and how does it work?

Who typically uses bridging loans?

What can I use a bridging loan for?

What is an exit strategy and why does it matter?

How is bridging loan interest calculated?

What's the difference between regulated and unregulated bridging?

Do I need a solicitor for a bridging loan?

What are current bridging loan interest rates?

What fees are involved in a bridging loan?

What's the total cost of a bridging loan?

What's the difference between rolled up, retained, and serviced interest?

Are there early repayment charges on bridging loans?

Can arrangement fees be added to the loan?

Why do bridging rates vary so much between lenders?

Is bridging finance more expensive than a mortgage?

What credit score do I need for a bridging loan?

Can I get a bridging loan with CCJs or defaults?

Do I need to prove my income for a bridging loan?

Can self-employed people get bridging loans?

What property types can be used for bridging loans?

Can non-UK residents get UK bridging loans?

What's the minimum and maximum bridging loan amount?

What LTV can I get on a bridging loan?

How quickly can a bridging loan complete?

Can I get a bridging loan decision in 24 hours?

What documents do I need for a bridging loan?

What happens during the bridging loan valuation?

What can delay a bridging loan?

What's the bridging loan application process?

How do bridging loans work for auction purchases?

Should I arrange bridging finance before or after the auction?

What if the auction property needs work - can I still get bridging?

What deposit do I need for an auction property?

How can bridging loans break a property chain?

What if my buyer pulls out after I've exchanged on my new home?

Can I use bridging to avoid being gazumped?

Can bridging loans cover both purchase and renovation costs?

What's the difference between light and heavy refurbishment bridging?

How is bridging different from development finance?

Can I get bridging for unmortgageable properties?

What's a first charge vs second charge bridging loan?

Can I have a bridging loan on a property I already own?

What is cross-collateralisation in bridging?

What happens if I can't repay my bridging loan on time?

Can I extend a bridging loan if I need more time?

What's an AVM valuation and when is it used?

Bridging loan vs personal loan - which is better?

Should I use a bridging loan or remortgage?

Is bridging better than a mortgage for buy-to-let?

Can I get a bridging loan during divorce proceedings?

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