If you’re in need of a Bridging Loan, you may be wondering how quickly you can secure one.
Can you really get a fast bridging loan in 24 hours?
In this article, we’ll explore the factors that can impact the speed of a Bridging Loan application and provide tips for improving the process. We’ll also discuss the importance of a good exit strategy and how lenders assess it.
Table of Contents
- What is a bridging loan?
- How quickly can you get a bridging loan?
- What would cause delays?
- How to make a successful application
- Why get a bridging loan?
- What types of properties are acceptable?
- How do you pay back a bridging loan?
- FAQ
What is a bridging loan?
A bridging loan is actually quite a simple lending product but the name can be misleading.
It is a short term mortgage, or loan, that is secured against a property. Generally bridging lenders only go up to 75% loan to value but they will lend on almost any type of property, regardless of condition.
Whereas a normal mortgage will have a term of 25-30 years, a bridging loan will be setup for 3 months – 24 months. There’s no monthly payments, and you pay everything back at the end.
How quickly can you get a bridging loan?
One of the main advantages of a bridging loan is that it can be obtained relatively quickly, compared to other types of mortgages. This is because bridging lenders are more flexible and willing to take on higher risks in order to get the loan approved and funded as soon as possible.
They also recognise that people who need bridging finance often need the money fast!
You can expect an initial decision within 24 hours of submitting a full application. Then there is a need for the lender to undertake the usual property/conveyancing checks and to get the property valued. This still happens quite quickly, and much speedier than applying for a normal mortgage.
It should be possible to draw down your funds in 10-14 days, providing everything runs smoothly.
What would cause delays?
While bridging loans are generally a relatively simple lending product, there are certain factors that can delay the application process and impact how quickly you can secure a loan. In this section, we’ll explore some of the common issues that can hold up a bridging loan.
Lender delays
All lenders have their own ways of processing an application, and some are more rigorous (picky) than others. This can lead to more questions arising as the underwriting progresses.
Also there is the actual capacity a particular lender has to process loan applications. All lenders will have times where they are working at 100% capacity and this will inevitably cause some delays along the way.
If you have a very specific timeframe to work to then your broker will be able to select the best lender to provide this level of service. Occasionally this may mean that you can’t choose the cheapest deal as the processing times are too long.
Legal issues
Bridging loans can be used to purchase a new property or to refinance one you already own.
For purchases you will need your own solicitor and they will need to be happy with the results of their legal searches and investigations. This will include ownership, outstanding debts, covenants etc.
Sometimes, these can’t always be resolved as quickly as you would like.
It’s also necessary to employ a solicitor that can work at the speed that a bridging loan often requires.
The property
The lender will need to survey/value the property to be financed. As they will only have this property on their books for a short while they are not too concerned with its aesthetics etc.
But they work on margins that provide for the extra risk that comes with short-term bridging. They will lend even if the property is run down but it will always be a maximum LTV of the surveyors valuation.
So a problem with the valuation could mean that your loan amount is reduced.
Exit strategy
The exit strategy is how you will repay the lender once the agreed loan term has expired.
This is one of the most important aspects of a bridging loan application and each lender will look at it very carefully.
If they feel that the strategy is unreasonable or not detailed enough then they will ask you to provide further details and information. This will then hold up the application.
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If your situation is a bit different or needs a more personalised solution then our brokers can help.
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Let to Buy
Let to buy combines a buy to let remortgage with a residential mortgage. Allowing you to move house while keeping your current home.
How to make a successful application
A successful and speedy application will need you to be aware of the lenders requirements and to submit all of the relevant information and documents at the outset. Although it’s almost impossible to predict all of the queries, avoiding paperwork ping-pong always desirable.
Consequently, we would recommend working with an experienced mortgage broker.
How a mortgage broker can help:
CHOICE
The only way to ensure that you have investigated all of the options and lenders is to work with a broker.
Broker’s work independently of lenders and will have far more options available to them than any individual. There are many bridging lenders that do not widely advertise their services as they only want to deal with brokers and intermediaries.
They will also be able to seek out the solutions that suit your needs. Maybe you want the cheapest loan but don’t need a fast response. Or you need the quickest possible loan and are happy to pay whatever that costs.
HELP AND ADVICE
A mortgage brokers primary role is to match you with the most appropriate lender and product available to them.
This will first mean they need to ask you quite a few questions so they understand exactly what you need, and when you need it.
But a mortgage broker can also advise how to structure the loan, what is the best term option and help with other issues as they arise.
Importantly, they can help with your exit strategy. Making sure that it is viable and acceptable to the lender.
Why get a bridging loan?
Because bridging loans are so versatile and flexible they are used in so many different ways.
Here’s a few:
To bridge the gap between purchasing a new property and selling an existing one: A bridging loan can provide the necessary funds to complete a property purchase before the sale of an existing property is finalised.
To take advantage of a time-sensitive opportunity: If you come across a property or business opportunity that requires immediate action, a bridging loan can provide the necessary funds to act quickly.
To purchase a property at auction: Speed is of the essence when buying at an auction.
To release equity quickly: Bridging loans can be used to raise capital for any purpose. Whether that’s to secure a good deal, pay a tax bill or help your business with a cashflow issue.
What types of properties are acceptable?
Bridging lenders will generally lend on almost any type of property, regardless of condition. This includes:
- Residential properties: Houses, flats and apartments
- Commercial properties: Office buildings, warehouses, and other types of commercial property
- Land: Bridging lenders may also lend on land, whether it is undeveloped or has an existing structure on it
- Special purpose properties: This includes properties used for specific purposes, such as hotels, care homes, and student accommodation
It’s important to note that the lender will still need to value the property in order to determine the loan to value ratio. The lender may also consider the intended use of the property and the borrower’s plans for it when deciding whether to lend.
Loans are available even if the property is uninhabitable due to a lack of kitchen and/or bathroom etc. A high street lender will only accept a property that can be lived in upon completion. Bridging lenders are very happy with refurb projects, conversions and doer-uppers, but they will value these accordingly when considering your application.
Overall, bridging lenders are generally willing to lend on a wide range of properties, but it’s important to provide accurate and complete information about the property and your plans for it in order to secure a loan.
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How do you pay back a bridging loan?
How you choose to pay back a bridging loan is called an ‘exit strategy‘.
Bridging loans are typically paid back in a single lump sum at the end of the loan term. This means that there are no monthly payments, and the entire loan, plus interest and fees, is due at the end of the loan period.
Lenders will carefully assess a bridging loan exit strategy to ensure that the loan can be repaid and to minimise their risk. It’s important for borrowers to have a clear and realistic plan for how they will pay off the loan.
Broadly speaking, there are two ways to pay off a bridging loan:
Sale of an asset: This could be the secured property or perhaps another property that you own. Upon sale the loan is paid off.
Refinancing: This would involve replacing the bridge loan with a longer term mortgage such as a buy to let or second home mortgage.
In considering your proposed exit plan the lender will want to ensure that you have the financial means to pay off the loan, either through the sale of a property or other assets. They will also consider market conditions, such as the state of the housing market or the overall economic climate.
If you want to exit using a long term mortgage then some lenders will ask for proof of your acceptability for such a mortgage.
Related reading: What are some common exit strategies for bridging loans?
In summary
Bridging loans are multi-purpose short-term financing solutions that are secured against any type of property.
They are typically used to bridge the gap between purchasing a new property and selling an existing one, or for other short-term financial needs. Bridging loans are generally easy to secure and can provide a flexible and fast solution for those who need to access funds quickly.
However, there are several factors that can delay a bridging loan application, and it’s important to have a good exit strategy in place to ensure that the loan can be repaid without incurring penalty fees. By using a broker you will have the maximum possible choice and a professional to help you.
Overall, bridging loans can be a useful tool for those who need to access funds quickly, but it’s important to carefully consider the terms and plan for how the loan will be repaid.
FREQUENTLY ASKED QUESTIONS
How long does it take to get a bridging loan?
The length of time varies but you should be able to have the funds in 10-14 days in most cases.
Do bridging loans do credit checks?
Yes, a bridging loan application will involve a credit check.
Can you have a bridging loan as well as a mortgage?
This is possible and if attached to the same property the bridge will need to be a second charge loan.
Are bridging loans regulated?
Sometimes, it depends on how the property is to be used. This article answers the question in more detail?
Can you get a bridging loan with bad credit?
Bridging lenders tend to be more amenable to small amounts of bad credit. Our article Can you get a bridging loan with bad credit? dives in to this a bit deeper.
Can you get a 100% bridge loan?
The only way to get 100% funding would be for a lender to have sufficient security over one or more properties, to generate the money that’s needed.
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Bridging Finance Broker
This post first appeared on Respect Mortgages - Be In The Know, please read the originial post: here
