If you own a property, and there is some equity in it, then chances are you will qualify for a bridge loan. A bridging loan is a short-term loan ranging from £10K up to £5M with a term of typically 3-24 months, although some lenders will lend for a term of up to 36 months. These loans are typically used to finance property purchases while selling an existing property. They bridge the gap between the two transactions until longer-term finance, such as a mortgage, has been put in place.
Bridging loans are based on the property being used as collateral for the finance. The loan amount is based on the amount of equity in the property and the corresponding loan to value (LTV) ratio. Most lenders will lend up to 75% LTV but there are some who will lend up to 80%. The loan is secured by the lender placing a first charge on the property if there is no mortgage or other loan secured against it. If there is an existing mortgage or loan, then the lender will place a second charge on the property to secure the loan. This is not the same as a second charge loan which is another name for a second mortgage.
Most property types can be used as collateral for bridging loans including houses, flats and bungalows; and businesses can use commercial properties such as their offices, industrial units, hotels and restaurants to name but a few. Some lenders may take the condition of the property into account, but most will lend against property that is in poor condition and in need of refurbishment.
Bridging loan lenders are not regulated by the Financial Conduct Authority (FCA). However, applicants must be at least 18 years of age. Some lenders impose a maximum age limit but there are many lenders who don’t. Being unregulated means that lenders do not have carry stringent checks such as credit history checks or see proof of ability to pay as they would do for regulated loans such as mortgages and personal loans.
So, even if you have CCJs registered against you or there are defaults and arrears, IVAs and bankruptcy recorded in your credit history, you can still qualify for a bridging loan as these are not taken into account when a lender assesses your application.
Similarly, proof of income is generally not required so you will still qualify for a bridging loan even if you cannot prove your ability to pay back the loan.
All of this means that the application process for a bridging loan is shorter so, in principle, you can get a decision in principle within 24 hours, and the funds will be released to you within a matter of days.
For more information on whether you qualify for a bridging loan, please contact us by phone or by using our online contact form.