Our FAQs page is the quick route to finding out all about bridging loans

Bridging Loan FAQs

Below are the most commonly asked questions about this type of loan

What amount can I take out on a bridging loan?

Bridging loans start at £20,000 and upwards

How soon will my application be decided?

We can get you an agreement in principle within 24-48 hours.

I have bad credit; can I still get a loan?

Depending on the level of adverse credit, you will still be able to get a bridging loan secured against a property.

I am in arrears or have a CCJ against my name; can I still apply?

Depending on what the arrears are, lenders may take a look and offer a higher rate. Again, CCJ’s certain lenders will take a view depending on when the CCJ was issued and the amount it was issued for. Higher rates may apply.

What if I have trouble repaying the loan?

Depending on the circumstances, the lender may ask one to start servicing the loan or If there has been a chain break and a new buyer has been found, the lender may give you a few months. It’s all dependent on the situation and the lender’s policy in such situations.

What is a second charge bridging loan?

Second-charge bridging loans are a specialist type of secured loan where a property that still has outstanding mortgage payments is used as collateral. As with a typical bridge loan, the full balance is usually paid back within a few months in one lump sum. Ideal for raising funds for property improvements, a second-charge bridging loan is often accessible with no credit checks required and no proof of income. Popular when used for second-charge bridging loans, including property extensions, loft conversions, and building or room repurposing. After completion of the project, there’s usually the option of refinancing onto a secured loan, reducing the rate of interest. However, where major works are already taking place on a property, a bridge loan lender may be reluctant to accept it as collateral.

Will I get enough money?

Everyone is concerned about how much money they will be able to borrow with a bridge loan, and the amount that you can borrow depends on the value of your property and what kind of property it is. Once you decide that you want a bridge loan, a lender will evaluate your property and determine how much they are willing to lend you.

When will I get the money?

You will most likely want the money from your bridge loan right away so that you can buy your dream home, but you will have to wait a few weeks. While it only takes up to two days to find out if you have been approved, the formal offer will take around two weeks, and you won’t get the funds until two to four weeks after submitting your application.

What happens if I pay off the bridge loan early?

While most bridge loans do not have a penalty for being paid off early, there are some lenders who may charge a fee for this. It’s important to check your paperwork for any information on this matter before signing if you are planning on paying off your loan before it is due.

What will my rate be?

The rate that you qualify for with your bridging loan will be a huge factor in determining if you are able to afford your payments. Unfortunately, it’s impossible to quote a guaranteed rate without considering what the market rates are, what the loan-to-value ratio of the property is, how good of a credit score you have, and other factors.

How long do these loans last?

Bridging loans are not meant to be long-term, and while they can be arranged for lengths as long as one year, they typically have a term of just seven months. If you are going to need the money for longer, you will have to come to an agreement with the lender.

What kind of credit do I need to have?

While your credit is taken into consideration and may play a role in the interest rate you qualify for, bridging loans are usually based more on the loan than the value and condition of the property that is going to be held as collateral. As long as the property is in great condition and there is enough equity for a great loan value, credit isn’t a huge issue.

How to get a fast bridge loan?

If you think that working with bridging finance brokers is the best way to finance the purchase of your new home, then you will want to have all of your information ready before setting up a meeting so that you are prepared. Getting bridging loans in the UK takes the same information as a traditional mortgage, so you will need proof of income, employment, information about all of your debts, and identification information before a bridging loan broker will be able to help you.

If you currently own your home and are interested in selling it and buying the home of your dreams, your best bet is to take out a bridge loan, as this will make it possible to get the funds you need in order to make a purchase before you close on the sale of your home. Working with an expert in bridging finance solutions will ensure that the process goes smoothly and that you get the help and money that you need.

Why compare bridging loan interest rates?

Donkey Finance is a market-bridging loan broker with access to the best bridging finance deals. We compare bridging loan rates from dozens of independent financial specialists and mainstream lenders, ensuring every borrower is able to secure accessible funding. We are quick to compare bridging loan rates and borrowing costs, sourcing an affordable bridging loan for your requirements and budget.

How do bridging loans work?

Bridging loans are generally a short-term loan that uses property for security. Once you have obtained a bridging loan, you will be able to use the credit for a number of reasons, some of which include being able to quickly buy an additional piece of property, to free up some equity in another piece of property, and to be able to pay for a property before you are able to obtain a mortgage. If you are able to free up funds from additional properties, then you can use this money for a myriad of reasons. This may include paying for emergency bills or helping with cash flow problems at your business.

You can have a bridging loan as either the first or the second charge. When the bridging loan is the first charge, it means that you don’t have any other loans against the property. It will be a second charge when you already have another loan on the property.

Can I apply for a bridging loan?

Most people are able to apply for this type of loan. In addition, limited liability partnerships as well as limited companies can apply for bridging loans. To find out if you are eligible, you will want to speak to a lender about your unique situation.

Why would you need a bridging loan?

Because bridging loans offer short-term finance, usually for just 18 months, you will need to take out a bridging loan when you need money for a shorter period of time. While it is possible to extend your term by six months if necessary, normally only investors who are purchasing buy-to-let properties and HMO properties are able to have loans of up to three years.

There are a number of ways that you can use a bridging loan, including:

Buying additional property quickly: It’s often easier to get a better deal when you are buying a piece of property if you are able to act quickly. Borrowers can use a bridging loan to finance a new purchase without selling their current homes or having to obtain mortgages.

Freeing up cash: It’s normal to run into cash flow problems and if you need to deal with them quickly, then a bridging loan may be right for you. This will allow borrowers to gain access to the equity that they have in other property. Once they have secured the bridging loans, they will be able to pay bills or fix their cash flow problems while working out a better solution.

Repairing a transaction chain: When you are in a transaction chain while buying property, it can be frustrating when a transaction fails. A bridging loan is a great way to ensure that all of the transactions are completed successfully.

Buying auctioned property: You are often able to get a great deal when you buy property at an auction but you have to be able to pay for it quickly. Generally, you will need to complete the payment in under a month. Mortgages take too long to acquire but bridging loans offer you the speedy access to funds that you need to make the purchase possible.

Buying uninhabitable property: Sometimes you may want to buy property that is uninhabitable but you won’t be able to take out a mortgage against this type of security. Bridging loans allow you to finance the purchase and make the improvements necessary to make the home liveable. Then you can mortgage or sell the home as part of your exit route.

Buying land: When you are going to buy land that requires planning permission, you can easily finance the purchase with a bridging loan. This will then allow you to later refinance or sell the land at a later time.

Fund your lease extension: Many lenders won’t lend against a lease that is under 60 to 80 years, but you can use a bridging loan. You’ll be able to buy at a lower rate, easily renew your lease, and then refinance at a later time.

Refurbishing or developing property: Developers can benefit from using bridging loans to finance their development costs when they are buying property. After the purchase and work is completed, it will be much easier to refinance the property in order to pay off the money you owe for the bridging loan or resell the property, which will result in profits.

What property can be used as collateral for a bridging loan?

The great thing about bridging loans is that you can use multiple types of property for your security. While it’s very common to use your primary residence, you can also use undeveloped land or commercial property. Since the property doesn’t have to be finished to act as security for a bridging loan, it makes it really easy to finance using the property that you have.

The types of property that you can use as security when obtaining a bridging loan include:

  • Residential developments
  • Residential property
  • Commercial developments
  • Commercial property
  • Commercial investment property
  • Residential investment property
  • Land
  • Offices
  • Farms
  • Agriculture
  • Retail units
  • Auction properties (whether or not they are fit for habitation)

Do I need to be employed?

One of the main benefits of a bridging loan is that the lender doesn’t care what you do or if you are even employed. Since these loans use property as the security, your income doesn’t generally matter. Of course, in the cases where the borrower is going to be paying interest each month, then you will need to show your proof of income to prove that you can make the required payments.

How long do bridging loans last?

It’s important that you understand that bridging loans are for short-term needs. They generally can be used for up to 18 months but if you have special circumstances, then you may be able to get a bridging loan for up to three years. This, of course, will require special consideration. If you want a bridging loan for a shorter period of time, then that is possible and they can be for periods as short as a month. Since you are only paying interest for the actual days that you have the loan, you won’t have to worry about how much you will end up paying. Most people like to take out bridging loans for a longer period of time than they think they will need because circumstances can change and you may need the money for more time. Another great reason to opt for a longer term when securing a bridging loan is because you will have to pay another arrangement fee to extend the term once your initial term has ended. This fee will be in addition to the other interest you will owe.

How much money will I be able to get with a bridging loan?

While there isn’t a maximum amount that you can borrow with a bridging loan, most lenders do require you to take out at least £30,000 when you secure a bridging loan. The maximum that you are allowed to take out will depend on what kind property you are using for security, if it is suitable for security, and if your property fits with LTV requirements. If your property meets all of the criteria, then you will be able to borrow millions of pounds. The best way to prepare for a meeting with a loan advisor is to use a calculator to determine your payments and if you could afford to borrow the desired amount.

How will I know if I’m accepted?

When you work with expert loan consultants, you can rest easy that you will know right away whether or not you are going to qualify for a bridging loan. By dealing with an expert consultant, you will be able to get not only possible rates for your loan but also information on your qualification right away.

How long does the application process take?

The application process for a bridging loan can vary greatly and take anywhere between two and six weeks to be completed; the time that your loan will require depends on how complex it is. Some loans are simple enough to be completed in under a week but this is an exception to the rule and not something to plan for. Working with solicitors who are able to provide the lender with information in a timely manner will speed up the entire process.

When will I get the money?

Once the loan is completed, you will be able to get the funds on that same day. Your solicitor will talk to the lender, receive the funds from them, and then deposit them into your bank account so that you have access to them.

Will they do a credit check when I apply?

Only after you have submitted a formal application will the lender complete a credit check. At the time when you have agreed to the terms of a loan and are ready to move forward, they will perform a credit check once they have obtained your permission. While many people fear having poor credit, this is not a major problem for many lenders because the loans use property as security.

What fees need to be paid beforehand?

Most lenders do not charge fees that you will have to pay before securing your bridging loan. The first fees that you will have to pay will be for the property valuation so that the lender can determine how much the property is worth.

What interest rate will I have to pay?

The interest rates that you are able to get for your bridging loan will vary depending on a number of factors. These include the type of property that you will be using to secure your loan, how much the loan is compared to the value of your property, and other circumstances. The best rates that you can generally get will start at just 0.4% each month (4.8% a year) and will increase. If you are able to obtain a bridging loan at 0.4% and borrow £100,000, then you will need to pay £480 each month in interest.

Can I repay early?

It’s possible to pay off your bridging loan early and you then won’t have to pay the additional interest because you only have to pay interest on any days that you have money from the loan. Using a loan calculator is a great way to figure out how much money you will owe if you are planning on paying off your loan earlier than expected.

What is a closed bridging loan?

At Donkey Finance, we love helping our customers achieve their dreams of owning a new home, and we understand that sometimes you are unable to complete the sale of your home before the one that you want to buy becomes available. This is why we offer closed-bridging loans as a way to make it possible for our customers to buy a new home. When you have a contract on your home and a set closing date, you can get a great rate on the money you need for your new house with closed bridging finance.

When you have not yet completed the sale of your home but already have a closing date set, you can use a closed bridging loan to get the money you need in order to close on a new home. Because the lender won’t be assuming a lot of risk with this type of loan, you can usually get a great rate on the money that you need. Once you have sold your current home, you will be able to repay your closed bridging loan, leaving you with just one home and the mortgage that you have on it.

While closed-bridging loans are most often used to finance the purchase of a new home before the sale of the original home has been completed, they have a number of other uses as well. They can be used by businesses to help deal with seasonal fluctuations or to buy new equipment. Some businesses use closed-bridging loans to buy stock at a discount and then repay the loan as they sell the stock. Even property investors can benefit from these loans, as they will allow them to buy new property and then rent it out.

What Is an exit route?

Everyone has to have an exit route so that you can tell the lender how you are going to be able to exit and pay for the loan. This is how you are going pay off your loan when it comes due. This is generally paid for by selling the property but you can use another loan to pay off your bridging loan, sell company shares, or even get money through probate. Your lender wants you to have a plan of how you will pay off the loan before they provide you with the money.

What’s the cost of a valuation?

Your valuation will need to be paid for when you tell the lender to perform a valuation. This cost is generally £100 to £150 per each £100,000 that you are borrowing. This means that if your property has a value of £500,000, then you will need to pay between £500 and £750.

How much do solicitors charge?

You need to plan to not only pay your solicitor fees but also the solicitor fees for the lender. This amount is something that you and the lender will agree upon in advance and you will have to pay it to the solicitors beforehand. You can deduct these fees from your drawdown. Additionally, some solicitors will give the lender’s solicitors an undertaking that they will be paid when the loan is completed.

Will I need to pay arrangement fees?

Almost every single bridging loan lender is going to change an arrangement fee and these are generally between 1% and 2% of the total loan value. You don’t have to come up with the money to pay this fee as it will be taken from the advance.

Are there exit fees?

It is not normal for a lender to charge exit fees on their bridging loans.

What LTVs are available?

The loan to value that you can have for your bridging loan will depend on if the loan is a first or second charge. First-charge bridging loans can have an LTV of up to 75% of the value of your property. If you rely on equity in a second property for financing, then you can actually have an LTV of 100%. Second charges are typically the same. With more properties involved, you will be able to enjoy a higher LTV.

What if I have bad credit?

Unlike mortgages, your credit doesn’t matter as much when you are going to be securing a bridging loan. This is because the loan is secured against the property itself. It is possible through certain lenders to obtain a bridging loan without a credit check. Of course, if you do have bad credit, you will have to pay higher interest rates but you will still be able to secure a bridging loan.

What if I can’t pay the loan back?

You will agree to a time period during which you can pay back your loan when you secure your loan but if you can’t pay it back, then you have a few options. You can plan to extend the loan you have, which will cost you an arrangement fee, or choose to take out another loan with a different lender to pay off your current loan.

How are these loans regulated?

There are both unregulated and regulated bridging loans. If you are going to be living in your property that is securing the loan, then it is a regulated loan. These are treated the same as a mortgage and are under the purview of the Financial Conduct Authority (FCA). On the other hand, if it is commercial property or you are not going to be living in the property, then it is unregulated.

What’s a normal interest rate?

It’s normal for the interest rates on bridging loans to vary depending on the day. There are more than 100 lenders offering bridging loans in the UK. Most of these lenders are specialists and will get their funding directly from institutional investors. These lenders will charge from 0.37% and up.

Is bridging loan a good idea?

Whether or whether a bridge loan is a good idea depends on your specific demands, financial status, and loan purpose. Bridging loans are frequently used to “bridge” the gap between purchasing a new home and selling an existing one.

Is a bridging loan cheaper than a mortgage?

No, a bridging loan is not always less expensive than a mortgage. Bridging loans are intended to bridge the gap between the acquisition of a new property and the selling of an existing one.

Do you pay a bridging loan monthly?

Bridging loans are considered particularly hazardous by lenders, thus they require a clear exit strategy for loan repayment. Typically, this entails refinancing or selling a home. This does indicate that the loan is repaid in full at the end of the period.

Can anyone get a bridging loan?

Bridging loans are available to anyone or any business that needs short-term finance to bridge the gap between purchasing a new property and selling an existing one.

What does a bridging loan do?

A bridging loan is a short-term loan used to pay expenses during a transition phase, such as moving from one property to another. Bridge loans, like mortgages and home equity loans, are typically collateralized by your existing home.

What is the purpose of a bridge loan?

While waiting for their present home to sell, homeowners may use bridge loans to purchase a new one. Borrowers use the equity in their current home as a down payment for a new one while waiting for their current home to sell.

How much do you need to put down for a bridging loan?

A bridging loan typically requires a deposit of 20-40%. A 100% bridging loan can be secured without a deposit, but it may necessitate additional collateral to secure the loan, as well as stricter conditions and higher costs.

How much does a typical bridging loan cost?

Bridging loans have higher interest rates because they are designed to be short-term loans with a higher risk than normal mortgages. Depending on your situation, you should expect to pay anywhere between 0.55% and 0.75% per month.

What is a typical rate for a bridging loan?

Typical bridging loan rates range from 0.5% to 2% per month, depending on various factors such as the loan amount, loan-to-value (LTV) ratio, creditworthiness of the borrower, and the overall market conditions. The LTV ratio refers to the percentage of the property’s value that the lender is willing to finance. A higher LTV generally means a higher interest rate, as the lender perceives the loan to be riskier. Additionally, borrowers with strong credit scores may qualify for lower interest rates compared to those with weaker credit histories. It’s important to note that bridging loans are short-term loans, typically with a term of up to 12 months, and interest is calculated monthly rather than annually.

Is it worth getting a bridging loan?

Whether or not it is worth getting a bridging loan depends on your individual circumstances. Bridging loans can be a useful tool for those who need to quickly access finance to purchase a new property before selling their existing one. However, they are also a relatively expensive form of borrowing, and the interest rates can be high. Therefore, it is important to carefully consider your options and make sure that you can afford the repayments before taking out a bridging loan.

Here are some of the factors to consider when deciding whether or not to get a bridging loan:

The purpose of the loan: Bridging loans are typically used for short-term purposes, such as financing the purchase of a new property before selling your existing one. If you need to borrow money for a longer period of time, a traditional mortgage may be a more suitable option.

The amount of equity you have in your property: The equity you have in your property is the difference between the value of your property and the amount you owe on your mortgage. If you have a lot of equity, you may be able to get a bridging loan with a lower interest rate.

Your credit score: Your credit score is a measure of your creditworthiness. If you have a good credit score, you may be able to get a bridging loan with a lower interest rate.

The interest rate: The interest rate on a bridging loan can be higher than the interest rate on a traditional mortgage. Make sure you can afford the repayments before taking out a bridging loan.

The fees: There are a number of fees associated with bridging loans, such as arrangement fees and valuation fees. Make sure you factor these fees into your decision.