Bridging finance is a finance solution provided for the short-term; it is secured against property. If you consider taking out bridging loans and don’t know the process, this article will clear all your confusion.
Getting a bridging loan is not complex at all; you must go through an application process, meet eligibility criteria, and with the help of a broker, the loan will be in your hands within a matter of hours. Before applying, you need to clearly understand bridging finance, its eligibility criteria, loan terms and conditions, risks involved, and how bridging can be a good option compared to other finance options.
Getting bridging loans will be easier if you are familiar with the abovementioned details.
Easy Eligibility Criteria
The eligibility criteria for getting bridging finance are not tough; you can easily meet the requirements; these include:
- The applicant should be a minimum of 18 years of age; some lenders also define the upper age limit
- The applicant should be a resident of the UK or have a registered UK address
- There should be a viable exit strategy. The chances of loan approval are higher if you have a strong exit strategy.
- Bridging loans are offered with a Loan Value (LTV) ratio of 70% to 75%. Some assets need to be deposited as security if one wants to get bridging loans with LTV 80% or up to 100%. The minimum requirement is 30% to 35% of the property value.
- Bridging loans can be taken for both residential and commercial purposes for individual borrowers, investors, traders, and companies/businesses, private companies, limited liability partnerships (LLP), UK limited companies, overseas and over shore companies, and other ownership structures such as pension funds may also be considered.
Quick funding Solution
Bridging finance is a quick funding solution; unlike a mortgage loan, this temporary finance can be arranged in as little as 24-48 hours.
The terms of bridging finance are quite flexible, which is why it is easier to get bridging finance as compared to a traditional mortgage. They are flexible in the following terms:
- There are no limitations of experience; rather, first-timers and experienced both can apply for the loan equally. Experience can help you in getting the best deals.
- Income Evidence: No proof of income is required
- No proof of clean credit: The borrower does not necessarily have a clean credit history; the borrowers with a bad credit score are also considered conditionally.
- Flexible term duration: Typically, bridging loans are granted for a short-term duration ranging from 1 month to 12 months, but this term duration can be extended from 24 months to 36 months maximum.
- All property types in any condition are accepted, whether worn out or dilapidated. The property doesn’t need to be in good condition. Bridging loans provide funding for purchasing and developing property in any condition and type, whether commercial or residential.
- No exit/ early repayment fee: Bridging lenders usually do not charge any exit or early repayment fees, but a few lenders may charge.
- Flexibility in terms of interest payment: An interest is charged on loan, but it is not necessary to pay it every month; you can change it as a rolled-up or retained interest; meaning you can pay it in lump sump at the end of the term duration.
- Assets: Bridging loans can be secured against valuable assets such as expensive cars, watches, jewelry/gems, antiques, etc.
Convenient Application Process
The application process for bridging loans is not difficult; you may easily follow it with the help of a bridging loan UK broker.
Bridging finance application includes a summary of the deal, personal information, finance and property details of the applicant, rationale for taking the loan, security details that applicants will deposit, and a viable exit route.
- All applications are assessed on a case-by-case basis.
- Survey and valuation of property are done.
- After a survey and valuation are done, the bridging finance provider issues an approval letter stating all the terms of the proposed finance.
- A valuation report and all documents are sent to the solicitor. The lawyer states the terms and conditions of the finance offered.
- All documentation is signed, and funds are released
Seek bridging broker’s help
It is recommended to seek the help of an expert bridging finance broker to secure bridging finance. He can guide you in the right direction and negotiate with the lender. He can point out mistakes in the application and present your case better.
Without a broker’s help, approaching an expert lender and finding the best deal is tough. Also, the lenders want to deal through a broker. So, if you do not want your application to be rejected and want to avoid the hassle, it is better to seek a broker’s help.
What are the risks?
Some risks are involved with bridging finance/p2p lending. These loans are secured against the property; if you fail to repay the loan, your property can be repossessed.
Bridging loans are offered for the short-term; if the loan term gets longer, the interest rate rises. The sooner you repay the loan, the better; otherwise, you will have to pay a higher interest rate, which will be inconvenient.
You must be honest and transparent while providing information to the lender, as providing incomplete/incorrect information may lead to legal action against you.