Key Takeaways
- Speed and Flexibility: Residential bridging loans provide quick access to funds, allowing you to secure properties before selling your current one.
- Specialist Support: Brokers like Bridging Finance simplify the process, offering advice and handling the paperwork.
- Cost Awareness: Costs include interest, lender fees, and valuation fees, but repayment flexibility can mitigate long-term expenses.
- Diverse Applications: Ideal for breaking property chains, renovating unmortgageable properties, auction purchases, and more.
- Safe and Accessible: Suitable for various financial circumstances with the right exit strategy.
What Is a Residential Bridging Loan?
A residential bridging loan is a short-term financial solution designed to bridge the gap between purchasing a new property and securing long-term funding or selling an existing asset.
This type of finance is particularly useful in situations where time is of the essence, such as breaking property chains, purchasing at auction, or dealing with unmortgageable properties.
How Bridging Loans Work
- Initial Research: Start by assessing your financial needs and eligibility.
- Engage a Broker: A bridging finance broker, like Bridging Finance, can help you navigate the market, compare options, and secure the best terms.
- Loan Application: After receiving a decision in principle, submit your formal application with broker assistance.
- Valuation and Approval: The lender conducts property valuations to determine loan-to-value (LTV) ratios, which influence approval and interest rates.
- Funds Released: Once approved, funds can be available within 72 hours, but the process often takes 3-6 weeks, enabling you to complete your purchase.
- Repayment: Repay the loan through your exit strategy, such as selling your property or refinancing.
Key Benefits of Residential Bridging Loans
- Speed: Funds are available much faster than traditional mortgages.
- Flexibility: Use the loan for diverse purposes, including property renovation and auction purchases.
- No Monthly Repayments: Interest is typically rolled into the loan, repaid at the end of the term.
Why Choose Bridging Finance as Your Broker?
At Bridging Finance, we specialise in providing tailored advice and support throughout the bridging loan journey. Here’s why clients choose us:
- Fee-Free Service: Unlike some brokers, we do not charge advice fees, saving you up to £995+.
- Market Expertise: We compare options from a wide range of specialist lenders to find the right product for your needs.
- Comprehensive Support: From application to completion, we handle the admin and keep you informed at every step.
Eligibility and Loan-to-Value (LTV) Explained
Use our bridging loan calculator get an idea if you’ll be eligible, and how much it could cost.
Loan-to-Value (LTV)
LTV is a critical factor in determining your eligibility and the cost of your bridging loan. It is calculated as:
LTV = (Loan Amount + Mortgage Debt) / Property Value
- Maximum LTV: Typically capped at 80%.
- Lower LTV Benefits: A lower LTV often results in reduced interest rates.
Income and Credit Score
Unlike traditional mortgages, bridging loans rely on your exit strategy rather than monthly repayments, making income and credit score less critical factors.
Exit Strategy
Your ability to repay the loan through an exit strategy, such as selling a property or securing a long-term mortgage, is vital for approval.
Costs of Residential Bridging Loans
Understanding the costs involved helps you make an informed decision. Key expenses include:
Interest Rates
- Monthly Rate: Typically 0.68% to 1% of the loan amount.
- Repayment Flexibility: Interest is rolled into the loan and stops accruing once repaid.
Lender Fees
- Facility Fee: Usually 1.5% to 2% of the loan amount.
- Exit Fee: Rarely charged, as we avoid recommending such products.
Additional Costs
- Valuation Fees: £950 on average but may vary depending on property value.
- Legal Fees: Around £1,000 for properties worth £250k.
- Redemption Fee: Typically £100-£150 for administrative purposes.
Example Applications
Breaking Property Chains
Bridging loans allow you to secure your new home before selling your current one, making you a more attractive buyer and avoiding delays.
Renovating Unmortgageable Properties
Purchase properties needing major renovations that traditional lenders deem unmortgageable, then refinance or sell post-renovation.
Auction Purchases
Meet tight auction deadlines with funds ready within days, ensuring you don’t miss out on opportunities.
Bridge to Let or Flip
Investors can use bridging finance to renovate and either refinance as a buy-to-let or sell for profit.
Covering Urgent Costs
Use bridging finance for pressing personal expenses, such as care fees, while waiting for other funds to materialise.
Frequently Asked Questions
Is a bridging loan worth it?
Yes, if the benefits of securing a property outweigh the costs. Use our bridging finance calculator to estimate costs and evaluate your options.
Do I need a salary for a bridging loan?
No, eligibility is based on your exit strategy and property value rather than income.
How quickly can I get a bridging loan?
Funds can be released in as little as 72 hours, with an average timeline of 3-6 weeks.
What happens if I can’t repay my loan?
Failure to repay may result in property repossession. However, lenders often work with you to avoid this outcome.
Start Your Bridging Loan Journey Today
At Bridging Finance, we’re committed to helping you navigate the complexities of residential bridging loans with ease and confidence. Contact us for expert advice and a free, no-obligation quote. Secure your dream property with the speed and flexibility of bridging finance.