A bridging loan is a short-term funding arrangement designed to bridge the gap between two transactions. You may want to buy a new property, but the sale of your existing one is in the pipeline and has not yet been finalised. These loans are beneficial when you lack access to a larger funding source but require short-term financial assistance.
Figuralloans understands that a speedy cash infusion can help you accelerate the process of selling. Short-term bridging loans make exploring urgent prospects in the real estate market possible for you.
Are bridging loans a good idea? A bridge loan allows property purchase before you sell your current one. You do not have the funds to buy since the existing property has not yet been sold. Here, you can use bridging loans for house purchase.
BUYING A PROPERTY: Owning a new property before the current one sells. You do not have the funds to buy since the existing property has not yet been sold. Here, you can use bridging loans for house purchase.
REFURBISHING A PROPERTY: Before selling the current property, some urgent renovations might be needed. However, your financial condition is not suitable for sponsoring the cost. In such cases, bridging loans for property development can be beneficial.
BOOST CASHFLOW IN BUSINESS: When running a venture, you have to deal with a lot of challenges. One of them could be lacking funds for the immediate purchase of equipment. With the help of bridging loans for commercial property, you can secure funding against that equipment.
MANAGE MORTGAGE DELAYS: In specific scenarios, getting mortgage approval might take some time. However, waiting for it might result in losing an attractive property deal. Instead, you can plug the funding gap with bridging loans for mortgage.
Typically, bridging loans cost could vary from 0.5% to 1.5% monthly, which equals 6% to 18% annually However, it depends upon individual circumstances and some crucial factors, including:
This short-term financing option is particularly useful in situations where you require immediate capital. The funding can be arranged after the property is sold. Thus, before you secure permanent financing, you can rely on these loans for a suitable amount.
Anyone who is 18 years old and is a homeowner or potential homebuyer can apply for bridging loans. They should have a property to pledge as collateral. Therefore, if you want to shift to a less costly property or are aiming to ascend the property ladder, you are the right fit.
Businesses and property developers are also eligible to apply. Here, they need to opt for commercial bridging loans. Here, having a clear exit route plan is crucial. In both cases, the borrower must have a clear understanding of the repayment strategy to follow.
Figuralloans one of the best bridging finance providers has arranged a unique opportunity where you can apply online with minimal stress. Follow the straightforward steps to apply for same day bridging loans, as explained here.
Tap into the online form: Fill out the loan application to provide accurate details. Complete the application by requesting a suitable loan amount with an appropriate repayment plan.
Review the form: Once it has been provided with the required details, you should submit it successfully. Before proceeding, review the form at least once to ensure that no mistakes are left unattended.
Wait for the final verdict: We will have to verify a few aspects carefully, as these loans involve your assets. It will not take a lot of time. We can provide a fast bridging loan approval decision within 24 to 72 hours. Upon approval, we will provide you with the loan agreement, which you must sign and return to us.
When applying, you must provide a few key documents. These documents will be required to support your loan application, verify your identity, and enable us to assess the property's value and your repayment strategy.
Identity and address proof - Documents establishing your identification, like a passport or driving licence, will be required. For address verification purposes, you must provide utility bills or bank statements.
Income evidence - You must showcase your income by sharing details like pay slips, tax returns, etc. In some cases, you may need to provide your bank statements if the other required documents are not available.
Details of the property - In the case of the current property, proof of ownership will be a key document. The property information should also include details revealing the property's valuation, any outstanding mortgages, and planning permission, among other relevant information.
Evidence showing exit strategy - To make sure about how to repay bridging finance, concrete details that you will pay back through the sale of property or refinancing will be required. For that, you will need to share information about the interested buyers and proof of their affordability.
To utilise loans for the right purpose, obtaining the ideal amount is crucial. These loans can be obtained from £5000 to £20,000. Work out how much you should borrow with the help of the bridging loans calculator. Analyse the factors that can help you identify a perfect amount.
At times, some of you might need high-value bridging finance. Analyse the factors that can help you identify a perfect amount.
Financial condition
First, check your income and financial stability. Here, the current status of the debts you owe will also be a matter of concern. This will impact your potential to repay loans, and for the same reason, your credit history will also be evaluated.
Steady earnings can demonstrate good financial health. This increases the likelihood of obtaining the desired amount, as repayment will not be difficult for you.
Value of the property
You can borrow up to 75% of the property's value as a bridging loan. Here, you can use your current property or the new one you aspire to purchase. The aspects on which property value depends include location, property condition, type of property, and others.
LTV, i.e., Loan-to-Value ratio
This is a significant evaluation, as it can reveal the extent of risk we must take to offer you financial help. For large bridging loans, LTV should be low, as it will mean lower risks for lending. This is simply the portion of the asset's value that lenders like us can finance.
In this regard, you must assess the differences between personal and commercial bridging loans to gain a clearer understanding
| Personal bridging loans | Commercial bridging loans |
|---|---|
| Preferred for residential property purchase | Preferred for business-related property investment |
| Usually taken out by an individual | Usually taken out by a company |
| Competitive interest rates | Varies based on aspects |
| Might take days to process | Processing does not take longer |
| LTV up to 75% | LTV between 70% to 75% |
This flexible funding arrangement may seem like unsecured personal loans due to their shorter term. However, since your property will be involved in this process, you can obtain a loan amount against this asset. This is an immediate way to arrange funds until you receive a substantial funding amount.
These loans are further categorised based on their purpose and your financial circumstances. Compare bridging loans to find the right match that suits your needs and preferences.
These two types are determined based on how you plan to repay the loans.
Open bridging loans
Closed bridging loans
These options are based on the order in which loan repayments have been prioritised.
First charge bridging loans
Second-charge bridging loans
Although poor credit signifies higher risks, we have a different approach to it. Here, no hard checks will be conducted to validate your credit background upfront when you are pre-qualifying. However, obtaining bridging loans with bad credit requires weighing specific pros and cons.
Your credit history will be vital to us, along with the property value and your exit strategy. To have an upper hand in getting feasible rates and terms with loans for bad credit, you must work on improving your credit scores. Here are the perks and setbacks.
| Advantages | Disadvantages |
| Flexible financing than mortgages | Access to lower LTV ratios because of poor credit. Look for flexible bridging loans that accept bad credit and offer no hard credit checks for prequalification. |
| Fast access to funding without layovers | Risk of losing the asset prevails if you don’t go according to repayment plan. You should review the terms related to exit strategy; alternatively, consider applying for asset-based lending. |
| Short-term financial issues will not stretch | Late payments can be disastrous for a credit profile |
| Different exit strategies are allowed | No long-term borrowing is allowed. We recommend exploring bridging loan alternatives, such as secured loans or remortgaging, to secure larger funding. |
| Provide an opportunity to enhance credit scores | Pay late fees if payments get delayed |
These loans are typically designed to help you cover the small cash requirements that arise between the process of buying and selling properties. However, you should draw out a sizable loan against the property.
If you compare a bridging loan vs a mortgage, you can find out that the first option is faster but expensive than the second one. The alternative to this short-term finance is:
Figuralloans is one of the trusted lending platforms for searching for the best bridging loans in the UK. If you have clarity on what you need and how much you can afford, we are here to help you in every possible way. We have features aligned to meet the expectations of our borrowers.
The decision is quicker – Loan processing is done online, which avoids time-consuming steps. The decision is made more quickly, and you can access funds on short notice.
Tailored terms – Custom loan deals that perfectly complement your financial capacity will be provided. Take pleasure in the bespoke lending structures.
Clearer communications – You can contact us directly for any information you need. We are available 24/7 to assist you.
Location flexibility – You can access your funds online without needing to visit a physical location. Obtaining bridging loans in London or Scotland is not challenging.
What is the maximum term for a bridging loan?
The typical bridging loan is ideally a short-term property finance for quick purchases and home improvements. There, the minimum term is 6 months which can extend up to a maximum of 12 or 24 months. Map out the strategy to choose always tailored loans with flexible repayment options. It will help you to prevent lost property deals due to funding gaps.
Do I need to provide security or collateral for a bridging loan?
It is mandatory to secure the loan with a security or collateral via first or second charge bridging loan, as it is a secured loan. Lenders want to be on the safer side if you miss payments or default. They may repossess your asset if you fail to repay the loan. The collateral can be in the form of property, business assets, or, in some cases, a savings account.
How fast can funds be transferred to my bank account?
Fast bridging loan approval even result in in 24 hours to payout. If everything goes well with your application, same-day bridging loan approval is possible; otherwise, funds transfer may take up to 72 hours to be released depending on the documentation.
Are there any fees associated with bridging loans?
The interest rates can be estimated by using a bridging loan cost calculator. Still, bridging loans in the UK are useful in terms of fast approval on short-term financing as compared to mortgage. Additionally, there are extra charges, such as valuation fees, exit fees, and legal costs. Therefore, you should opt for an online application process with clear communication with the lender and face no hidden costs with bridging loans. Check whether there are no pre-payment penalties, and compare monthly vs annual rates.
What is an exit strategy for a bridging loan?
The exit strategy involves the lender asking the borrower to outline a clear repayment plan for the bridging loan upon its term's end. The strategy should be strong and effective because the loan provider analyses the level of risk involved in funding you. Typically, exit strategies include the sale of property, cash redemption, sale of another asset, and refinancing.
How do I repay a bridging loan?
Once the existing property gets sold, you can pay back loans following a monthly pattern with rolled-up interest option. Additionally, if a monthly payment can be arranged from your salary, please proceed. Then, you do not have to rely on the property sale, which might or might not happen within the term. Options like early repayment or overpayment are open.
Can I repay my bridging loan early without penalties?
Yes, you can repay your bridging loan early with no ERC (early repayment charge). However, you need to go through the loan terms and conditions, particularly the repayment plan. If your lender allows early repayment, you will save a significant amount of interest later.
Is a bridging loan regulated?
Yes, these loans are regulated as affordability checks are a mandatory requirement. With us, you can experience complete transparency regarding lending conditions. We never hide the fee structure from our borrowers. You can return to us to retrieve any information related to these loans.
What happens if you do not repay loans on time?
One of the bridging loan risks is late fees that will be charged if you fail to make monthly payments on time. You should avoid delaying payments as it will adversely affect your credit scores and legal action may be against you in the court. In extreme cases, you might have to deal with repossession risk, the forced sale or auction of the property.
Does getting a bridging loan affect my credit score?
It can have both positive and negative effects on your credit score. It can hurt your score in situations of late or missed payments, increased debt-to-income ratio, hard credit checks, and repossession of your asset by the lender. On the other hand, timely repayments of these soft credit check bridging loans can contribute a lot to your credit score improvement. Your responsible borrowing has a positive impact on lenders, and your loan approval chances go higher.
Should I use a broker?
Here, you have the opportunity to get direct lender bridging loans. There is no point in contacting a broker, as this may take a substantial amount of time. You can compare pre-approved offers from multiple lenders to see how we offer a competitive price in the market.
Can I get a bridging loan for multiple properties?
Yes, you can obtain portfolio bridging finance for purchasing multiple properties, such as rental properties, apartments, or student housing. However, you need to meet the eligibility criteria, particularly by putting one or two properties as the loan collateral. Besides, a solid exit strategy is also required.
Can I get 100% bridging loans?
There can be a chance of receiving high LTV bridging loan but for the multiple properties' purchase. Even if you get it, it will have its own set of drawbacks. You may need to provide a sizeable deposit or equity to reach the full value. There is a risk warning where you should be beware of the debt burden it may create for you.