How to get a Bridging Loan

How to get a Bridging Loan – The process

It’s a relatively straightforward process to get a bridging loan if you work with a specialist broker who can guide you through the process and handle all the paperwork to improve your success rate.

For peace of mind, the process of getting a bridging loan looks something like this:

1. Prove your ID

As we’re dealing with finance, you’ll need to prove who you are, where you live, your nationality, financial position, and prospective earnings. If you’re a business, you’ll also need to verify your company type, status, and how many properties you own.

You may also need to provide valuations for any properties you plan to use as collateral depending on the type of loan you want to take out.

Some loan types will include a credit check. This isn’t always required and we can provide bridging loans with bad credit should you need one.

2. Property details

You’ll need to provide the details of the property you’re going to secure your bridging loan against.

We’ll need the address, type of property, valuation, purchase price, tenure, and potential future use.

We may also need a projection of future rent or earnings from the property if it forms part of your exit strategy.

3. Loan details

The loan details include what you want to use the bridging loan for, how much you want to borrow, the length of time you want to borrow, and the loan-to-value rate of the loan.

The typical Loan To Value (LTV) of a bridging loan is 75% – 85%.

Things to consider before getting a Bridging Loan

A bridging loan could be the answer you’re looking for but it’s also a serious financial commitment. We recommend researching thoroughly before signing a contract. Consider things such as…

Fees

Bridging loans typically involve fees on top of the interest rates.

Those fees can include:

• Arrangement fee – Around 2% of the loan amount
• Administration fee – Fee to cover the cost of arranging the loan
• Legal fees – To cover the cost of conveyancing
• Valuation fees – Property valuation fee
• Exit fee – Some loans charge an early repayment fee

There may be other fees involved so make sure to read any paperwork carefully to know what you’re getting into.

Exit strategy

Your exit strategy is another way of demonstrating how you’ll pay back your loan. Unlike standard monthly mortgage repayments, a bridging loan tends to work a bit differently.

As it’s a short-term loan, you’ll typically pay it off all at once, from:

• A property sale or inheritance
• Refinancing when the property qualifies for a standard residential mortgage
• Finance acquired from other means

Your exit strategy is a core acceptance criterion so you’ll need to prove it will be sufficient to repay the loan, interest, and fees in full.