An Introduction To Bridging Finance

When it comes to taking out a loan or securing financing, long-term loans such as mortgages may not be the ideal solution.

When an individual is looking for short-term financing to help bridge a financial gap, bridging loans may be a more feasible option. This financial solution offers applicants immediate capital that can be secured using property that is owned and also offers flexible terms and repayment options.

Before applying for this type of financing, there is some important information that you should know.

Applying for Bridging Finance

When beginning the application process for a bridging loan, it is important to have certain information available during the initial conversation with your lender.

The information that should be on hand includes the applicant’s full name, address, information on the security property used to apply for the loan, the property’s appraised value, solicitor’s information, and the amount of money that is being requested. All of this information will be important to the lender when considering the application.

In the best cases, an initial Decision in Principle or DIP will be available to the applicant in as little as 24 hours.

When the borrower has reviewed and agreed to the outlined terms of the loan, he or she will then need to provide a certified copy of his or her passport and current utility bill.

In the final stages of the loan approval process, the applicant will be asked to pay any initial fees or upfront costs which are outlined in the lending proposal. From here, the applicant can expect to receive their loan in 7 to 14 working days.

Initial Fees Associated with Bridging Finance

Lenders will generally incur some kind of costs when it comes to accepting and processing an individual’s loan application. As part of arranging the applicant’s loan, lenders will generally ask that these costs be covered by the applicant.

Any upfront or initial fees will be outlined in the lending proposal and can include legal fees, valuation costs, and/or application fees.

These fees are generally presented and described to the applicant before he or she agrees to the overall terms of the loan.

Security Types Used with Bridging Loans

Depending on the applicant’s unique situation, long leasehold or freehold properties can be used as collateral to secure the bridging loan.

If the loan is being requested by a business or company organization, the lender may require the applicant to submit a debenture or personal guarantee in addition to security.

Terms of the loan will also vary depending on the applicant’s situation – repayment periods can range from 30 to 90 days and can even be extended to up to one year or 18 months.

New Remortgage Guide Published

1st UK Mortgages publishes new guide to bad credit remortgages.

property refinance photoA new guide from mortgage specialist 1st UK Mortgages aims to help those with adverse or bad credit to find a UK mortgage that is right for them.

Founded in 2007, 1st UK Mortgages introduces those looking for mortgages to mortgage advisers regulated by the FCA. In addition to adverse credit remortgages, the company also specialises in finding mortgage and remortgage deals for those who are self-employed, as well as non-status and HMO mortgages.

Their new guide highlights that while many people fail to buy their dream home after being denied a mortgage, this doesn’t necessarily need to be the case.

In today’s economic climate, saving money and finding good deals are vital – especially in the UK property market. This guide has been designed to provide assistance to those searching for a new home, but have been refused or declined for an adverse credit remortgage in the recent past.

Approach House Purchasing With Caution

Buying a new house is clearly a large investment and should be considered carefully with both broker and agent, but the tips provided in the guide will help borrowers to find good deals that won’t break the bank.

The guide helps borrowers to avoid predatory lenders, who often prey on home buyers with less than perfect credit. These lenders often offer low or no down payments, but charge extremely high rates of interest and can be less than helpful if problems arise.

Further Advice

Tips also include ways investigating whether traditional lenders are really the only viable option for those with poor credit, advice to those who have previously missed credit payments and how to find secured loans or buy to let mortgages with an adverse credit score.

Says Peter Bradshaw owner, “Many people struggle to really understand bad credit remortgages. This guide provides solid information that is not normally shared openly by the UK mortgage industry, and will hopefully help more people to find their perfect home.”

To see the guide in its entirety, visit

Closed Bridging Loans And How They Work

Closed Bridging Loans are a financial strategy that is most often used by residential investors or developers who are looking to fund the purchase or renovation of a property in order to refurbish and then sell.

Most often, financing for these projects come in the form of a short term loan that is secured against the property being renovated. For Closed Bridging Loans in particular, the exit strategy or the plan in which the borrower has to repay the loan must be guaranteed by the sale or remortgage of the property being used to secure the loan.

Here we will answer some of the most asked questions about Closed Bridging Loans – if you need additional information, a loan broker can be a great resource.

How Much Funding Can Be Borrowed Using a Closed Bridging Loan?

In most cases, the minimum borrowing amount for a Closed Bridging Loan is £26,000 and can extend to much larger amounts but some lender’s qualifications vary, so it is important to consult with a loan professional.

As far as security, most lenders will allow financing using the property being refurbished or purchased as long as the work is being done with the intention of selling the property through a licensed real estate agent. Closed Bridging Loans are not an option, however, if the property developer or residential investor plans to make the property his or her own permanent residence.

What Loan to Value Can is Seen on Closed Bridging Loans?

The Loan to Value, or LTV, of the loan will depend heavily on the value of the property that is being used as security. In general, 80 percent of the property’s purchase price will be reflected in the loan’s LTV or 70 percent of the OMV.

Depending on additional security that is available, the lender will grant either the higher or lower percentage for the loan. If you need more information on a property’s LTV rate in terms of a Closed Bridging Loan, it is always a best practice to contact a knowledgeable finance broker who is familiar with this type of funding for property resale projects.

Does the Property’s Geographical Area Come into Play?

In many cases, in order to qualify for a Closed Bridging Loan for a refurbishment project, the property must be located within a geographical area in which the lender covers. In general, areas such as Wales, England, and Scotland will be covered by most lenders.

Before applying for a Closed Bridging Loan, make sure that the property in question does indeed fall within the correct geographical area for the lender to help ensure there are no problems down the line. If you need help to identify whether or not the property is covered based in its location, contact a finance broker for assistance and more information.

Does a Borrower Need to Prove their Current Income to Qualify for a Closed Bridging Loan?

Since Closed Bridging Loans are accepted based on the value of the property being purchased or refurbished, the borrower’s current income does not come into play when the lender makes a final decision.

Lenders will, however, take a close look at the borrower’s Experian credit report and score in order to help them make an education evaluation about what type of borrower the applicant is. Even though the borrower’s income holds no weight in the decision making, it is important to know that the applicant’s borrowing history will be looked at and evaluated when the lender is finalizing the loan.

Will the Borrower Need to Supply Their Own Mortgage Broker or Solicitor?

As with any type of financing, it is always recommended that a potential borrower seek the assistance of a professional, independent mortgage broker and/or solicitor. These professional should specialize in the arena of property purchase for resale or whichever market the borrower is working in and should be consulted before signing any legal documents from a lender or financial institution.

Often times, having retained the help of a mortgage broker or solicitor can help to streamline and speed up the loan application and approval process, making them an asset for those working in property refurbishment.

What Repayment Terms can a Borrower Expect with a Closed Bridging Loan?

There is no benchmark for what the repayment terms for Closed Bridging Loans are. Since every borrowing situation is different, lenders will evaluate applications on a case by case basis and create repayment terms based on that particular borrower’s lending situation as well as the total amount of funding that is being borrowed.

Closed Bridging Loan repayment terms can vary from one day to up to twelve months, all depending on the situation. In most cases, it is best to contact a finance broker to discuss the project so they can give a better idea of what the terms of the loan will look like.

What Costs are Associated with Arranging Closed Bridging Loans and How Long Does the Process Take?

Again, there is no benchmark for the costs and fees associated with arranging a Closed Bridging Loan – each lender is different on how they evaluate the cost of their time and effort to put the loan agreement together.

Some of the common costs and fees associated with loan are arrangement fees, valuation fees, monthly interest, and exit fees as well as whatever fees the borrower’s mortgage broker or solicitor will charge for their services.

In general, Closed Bridging Loans can be arranged in as little as 72 hours provided all the needed information is available and the broker replies to the lender’s questions quickly.


Bridging Finance Loan to Value

What Does LTV Mean in Reference to Bridging Finance?

One of the major factors that lenders consider when assessing loan applications for properties is Loan to Value, or LTV.

The calculations associated with Loan to Value are an important part of a lenders decision making process when approving different loans including bridging finance, commercial & residential loans, and first or second mortgages.

Although lenders are well versed in the importance of LTV, many borrowers lack a good understanding of what this calculation means for their loan application.

Loan to Value and Lender Risk

Loan to Value is expressed as the ratio of how much an applicant owes on a mortgage compared to the value of the home or property. When considering these ratios, lenders will take the time to calculate the LTV and tend to lean toward applicants who have a lower percentage, which translates into a lower risk for approving and supplying the loan.

A lower Loan to Value means that the borrower is more able to pay his or her repayment amounts consistently and on time, which means more security for lenders.

Let us consider an applicant who is holding a £50,000 mortgage on a home or property that is worth £100,000. Based on these values, this applicant will have a Loan to Value percentage of 50 percent and equity on the property of £50,000 – the mathematical difference between the mortgage and property’s value.

This is generally considered a low LTV percentage and offers the applicant more opportunities.

Does an Applicant’s Credit Score Effect their Loan to Value Percentage?

When calculating an applicant’s Loan to Value percentage, a credit score is not factored into the equation. It is, however, another significant aspect for lenders when considering a loan application. An individual’s credit score will help reveal their borrowing habits and repayment history, which is important evidence for a lender to know when they are considering extending a loan.

If an applicant has a less than perfect credit score, a low LTV percentage will generally overrule the lender’s concerns.

Bridging Loan Interest Rates and Loan to Value

Loan to Value percentages are crucial calculations for lenders to make their initial decision regarding a loan but they also play and important role in deciding the interest rates that will be associated with the financing.

Interest rates for bridging loans are generally based on the lenders overall risk for supplying funding – the lower the risk to lenders, the lower the interest rates. So, generally speaking, an applicant with a low LTV percentage and good credit score should see the lowest interest rates available.

Bridging Finance for Buy to Let Explained

Using Bridging Loan Financing to Purchase Buy to Let Properties

The housing market in the United Kingdom has been on the decline for the past few years and does not show any signs of improvement.

Because of this, it is becoming more and more difficult for individuals to purchase homes outright, leaving a large opportunity to rental and buy to let properties.

With the demand for rental properties growing, more and more investors and property developers are looking for ways to fund purchasing and renovating buy to let properties in order to make a substantial profit.

Choosing Bridging Finance for Buy to Let Properties

One of the biggest advantages to using bridging loans to purchase buy to let properties is the speed in which the loans are approved and dispersed. This is a huge advantage for landlords, investors, and property developers who are looking to purchase quickly or have the opportunity to close sales on auction or foreclosed properties.

In the perfect scenario, a bridging loan can be applied for, approved, and dispersed to the borrower in as little as seven working days, helping to make purchases fast.

Additionally, bridging loans are a great short-term solution for this individuals looking for interim financing. This type of loan is generally repaid within one year of distribution and can be secured with either a property that is currently owned or other assets owned by the applicant.

Although the interest rates associated with bridging finance tend to be higher than traditional loans, they are much more flexible and allow the applicant to secure the funding they need right when they need it.

Why Choose Bridging Finance Over Traditional Buy to Let Mortgages?

When an investor purchases a property in foreclosure or that is put up for auction, the property will more than likely need some renovation done before tenants can occupy the building. Generally, lenders who provide buy to let mortgages will not extend this type of financing unless the property is habitable and there are tenants living in the space.

A bridging loan can help property developers bridge the financial gap between needing to make upgrades and securing longer-term financing.

It is important to remember, however, that bridging finance is not meant to be a long-term financial solution. Bridging loans are meant to assist applicants in purchasing and renovating properties quickly or to help fund a project while longer-term, lower interest rate financing is put into place.

Although bridging finance is helpful, it also comes at a price – interest rates for this type of financing is often much, much higher than the interest rates offered on traditional buy to let mortgages.