When applying for bridging finance, every lender has their own set of lending criteria a borrower must meet to be accepted for a loan. This article looks at typical lending criteria you will likely have to meet to qualify for bridging finance.
Minimum loan size will vary from lender to lender. Most lenders have no upper limit on how much you can borrow.
The loan term describes how long you want to borrow the money for. Bridging loans are designed to be a short-term finance option, with most lenders typically offering a maximum term of 12 months. However, longer term options are available, although these are less common and will be dependent on the client’s individual circumstances.
Bridging loans can be used for almost any legal purpose. The most common uses of bridging loans are:
- buy property at auction
- fund a renovation/refurbishment/restoration
- raise working capital for your business
- buy property in poor condition
- build a property
- purchase land
- buy a new property before selling your current property
- meet unexpected expenses and pay urgent debts
Who Can Apply?
Bridging lenders will lend to the following borrowers:
- Private individuals
- Limited companies
- Offshore companies
- Pension funds
- Certain types of trusts
Bridging loans are available for applicants based in the UK. You must have a registered address anywhere in the United Kingdom. Non-regulated loans are also available for foreign nationals and expats.
You must be at least 18 years old to qualify for a bridging loan. Some lenders impose maximum age limits, usually up to 80 years of age. Exceptions can be made on an individual basis and for scenarios such as Power of Attorney applications.
Security is an essential lending criteria in qualifying for a bridging loan. You must have a form of security to secure the loan against, and it will most likely need to be property. The lender will secure the loan by taking a first, second, or third charge over the property. The property must also be located in the UK, as there can be some restriction with lenders based on the location of the property.
With many lenders operating within the bridging sector, the different types of acceptable property is wide and varied.
Security property can be in all conditions, including in poor condition, in need of renovation and restoration, needs to be demolished, and uninhabitable property with no kitchen or bathroom.
There are lenders available within the marketplace that put less emphasis on a client’s credit history when applying for bridging finance, provided other lending criteria is met.
Many lenders don’t require proof of income however, this is dependent on the individual case and strength of the exit strategy. Some lenders may require proof of income, however, this will vary from lender to lender. In these instances, the documents wouldn’t normally differ from those required for a standard mortgage.
The interest on the bridging facility can be either serviced or retained. This means that you can either choose to make monthly payments and “service” the interest. Alternatively, the interest will be added onto the loan advance and the owing amount of interest is redeemed at the same time the bridging facility is repaid in full. The total amount payable when the facility is redeemed or at the end of the term will differ depending on the chosen method.
The exit strategy sets out how you will pay the loan back to the lender. This is one of the most important criteria when qualifying for a bridging loan, and a well-defined exit route is essential.
The most common ways to repay the loan are through selling the property or refinancing to a standard mortgage product. Another strategy is through using money due to be received such as from inheritance or cashing in investments.
Will I Qualify for a Bridging Loan?
Get in touch today and one of our highly experienced advisers will talk you through your options.
With access to exclusive products not available elsewhere, we arrange bridging loans to suit all situations, so even if you can’t meet every single piece of criteria, our expert advisors will find the best deal for your circumstances.