Bridging Loans and Bridging Finance:
Expert Advice and Brokerage

Bridging Finance in the UK: Everything You Need to Know

If you're seeking bridging finance in the UK, this guide provides key information to help you understand how these loans work, their costs, eligibility criteria, and the application process. Whether you're considering a bridging loan for property development or auction purchases, this article will give you insight into rates, loan types, and more.

What is a Bridging Loan?

A bridging loan is a short-term, interest-only loan designed to ‘bridge’ the gap between an immediate financial need and a future funding source. These loans are often used for property purchases, such as buying at auction or funding renovations, when a conventional mortgage isn't available quickly enough.

Bridging loans typically have higher interest rates than other loan products. However, they are quicker to arrange, often within days, and more flexible in terms. To be approved, you’ll need to present a strong exit strategy—this is how you plan to repay the loan at the end of the term, usually through property sale or remortgaging.

How to Get a Bridging Loan

The best way to secure a bridging loan is through a specialist broker. They can help you:

• Prepare your exit strategy: Whether through property sale or remortgage, having evidence like offers or agreements in principle will strengthen your application.

• Optimise your credit report: Brokers can help clean up outdated or inaccurate credit information.

• Identify the right lender: With their market knowledge, brokers can quickly pinpoint lenders offering the best deals based on your situation.

Costs of a Bridging Finance Broker

Mortgage One’s fees vary from case to case. Talk to us today to discuss your requirements and we’ll explain every cost fully, and in advance.

Are Bridging Loans a Good Idea?

Bridging loans can be a great solution in scenarios where time is of the essence, such as:

• Buying property at auction: Funds are needed quickly to secure the purchase.

• Bad credit situations: You may secure a property while awaiting improvements to your financial situation.

• Renovating uninhabitable property: Bridging finance can fund necessary work to make a property mortgageable.

Eligibility Criteria

To qualify for a bridging loan, lenders look for the following:

• Strong exit strategy: Clear evidence of how you'll repay the loan.

• Security property: A desirable property can boost your chances of approval.

• Clean credit history: Although bridging lenders are flexible, strong credit may help you secure better rates.

• Experience in property: This can be advantageous but isn’t always required.

The Application Process

Applying for a bridging loan through a broker streamlines the process. Here’s how it works:

1. Consult with Mortgage One to prepare your exit strategy and assess your eligibility.

2. We’ll do the paperwork and submit the application, including supporting documents such as property valuations and credit reports. We only submit cases when we are certain there is a very high chance of approval.

3. Conditional approval is often granted within days, followed by the formal agreement after the lender’s valuation.

Interest Rates and Loan Terms

Bridging loan interest rates are higher than standard mortgages, typically ranging between 0.75% and 1.5% per month. The loan term is usually short, often 12 months or less. Rates vary by lender, but securing lower rates often depends on your exit strategy and the loan-to-value (LTV) ratio, which is usually capped at 75%.

Types of Bridging Loans

• Regulated vs. Unregulated Loans: Regulated loans follow FCA guidelines and are typically for residential properties. Unregulated loans cover commercial uses.

• Open vs. Closed Agreements: Open loans have flexible repayment schedules, while closed loans have a fixed repayment date, often based on a pre-arranged sale.

Can You Get a Bridging Loan with No Deposit?

It’s possible to secure bridging finance without a deposit, but this usually requires offering multiple properties as security. This increases the risk of repossession if you can’t repay the loan.

Speak to a Bridging Finance Expert

For the best advice on securing a bridging loan, it’s recommended to consult a whole-of-market broker, like Mortgage One. They will guide you through the application process and help you find the best rates available for your circumstances.