In the UK mortgage market, there are many lenders, from large lenders to small private lenders and each have their own lending criteria.
Some lenders will only lend where the risks are low, while other lenders will specialise in lending on the riskier propositions.
We have laid out a guide for the usual lending criteria to make things easier for you.
A bridging loan is defined as a short-term facility ranging from 1 day to 12 months.
Most bridging finance lenders offer loan terms up to 12 months (for FCA regulated bridging loans) or 18 months (unregulated). Certain lenders will also offer short term loans for up to 36 months (3 years).
Some lenders provide short term loan facilities up to 36 months.
When you decide to take out a bridging loan, lenders will want collateral against which they will be lending. Usually a property (or several properties) is used as collateral and this is known as the security property.
The lenders will place a legal charge on the security property (or properties), which will also be registered at the land registry as a first, second or third charge.
A first charge is when the security property has no existing mortgages on it. This kind of property is known as an ‘unencumbered’ property.
Second and third charges are placed on a property by the lender when that property already has an existing first charge on it.
Type of Property
Bridging lenders lend on the following types of porerty:
Out of all of these property types, residential properties attract the best interest rates because they are deemed by the lenders to be the most secure to lend against.
Other Types of Security
Property is not the only security that bridging loan providers will lend against. Certain specialist lenders will give you a loan if the security items are valuable, like jewellery, cars, antiques, precious metals like gold or platinum, art gems etc.
Condition of the Security Property
Unlike high street lenders, bridging loan providers do lend on properties that are in poor condition. This is why bridging finance is a good option to refurbish or rebuild this type of property.
Location of the security property is a big factor in bridging finance. Some bridging lenders will lend only in or around London, while other may lend all over the UK, but the interest rates would be higher in these cases.
Age & Availability
Bridging lenders are able to arrange bridging finance for both individuals and businesses (limited companies, partnerships and offshore companies).
In the case of individual bridging loan applicants, the applicant must be at least 18 years old.
Payment of Interest
Bridging loan interest can be payment monthly, or they can be ‘rolled up’. This means that the interest is repaid when the loan is redeemed. This is also known as deferred or retained interest. Most people choose this option over the monthly payments, as in case of monthly payments, proof of income is required.