Updated: April 20, 2022

Bridging Mortgages

Need a bridging loan for a house purchase? Wondering if it affects your main mortgage application? Find all the answers & how to get one in our expert guide!

Get Started
Ask A Quick Question

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
£
£
£
2 of 3
3 of 3 Send!

No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: April 20, 2022

Bridging loans provide you with the upfront capital needed while you wait for a longer-term financial solution to come into effect. They can be used for a variety of different reasons but, perhaps, they’re most commonly connected with purchasing a home. 

By reading this guide you’ll better understand how a bridging loan could be a short-term option when buying a house, the scenarios when it might make sense and why seeking the help of a specialist broker can make the application process much more straightforward.

Can you use a bridging loan to buy a house?

Yes. If there’s a property you’re hoping to buy but your mortgage hasn’t been finalised yet, a bridging loan can act as a short-term solution, ensuring you don’t miss out on the property in question. In effect, it “bridges the gap” until that longer-term financing comes through and for that reason is often referred to as a bridging mortgage.

Speak to a expert today

Get Started

How does it work?

To apply for a bridging mortgage, you’ll need a deposit and must be able to prove you have “an exit strategy” for paying back the loan. In this scenario, the exit strategy would be the refinancing onto a conventional mortgage once that’s been approved. You can opt to use the same lender for both the bridging and conventional mortgage or use a different one.

Lenders usually offer bridging mortgages for periods of either 6, 12, 18 or 24 months and charge monthly interest rates anywhere between 0.39% and 1.5%. With a closed bridging loan there’ll be a set date agreed for repayment but an open arrangement means there’s no specific date. You would, however, be expected to repay within a year. If you can’t repay, the lender has the right to repossess the property.

Two loans and potentially two lenders could signify double the stress but working with an expert can help you navigate both processes.

Circumstances where this might make sense

Bridging finance was originally created to offer short-term finance assistance where one part of a selling chain has fallen through. A bridging loan can help avoid a delay or break in the chain and be paid off once the sale goes through.

These days however, there are multiple other scenarios when such a loan might make sense. These include:

  • When purchasing a property at auction. In this scenario, a property or piece of land must be paid for within 28 days. This likely isn’t enough time to get a mortgage application processed but a bridging loan can be. Just note that the lender will want to see a property valuation, rather than just the final sale price, before they approve.
  • Wanting to buy before a rival buyer steps in. If you’re worried another buyer might swoop in on the house you’re wanting to buy, speeding up the sale process by showing you’ve got the funds right now could work in your favour.
  • When a conventional mortgage is proving hard to get. Maybe you’ve got bad credit, a bit more debt than you’d like or know that your income is likely to change in a few months. You could apply for a bridging loan until you’re able to remedy some of these issues and apply for a conventional mortgage.
  • Wanting to “flip” a property. If there’s a property you’d like to buy and renovate but lack the capital to undertake the work involved, a bridging loan could provide that. Selling it at a higher price post-renovation makes for a great exit strategy, as long as you can complete the work quickly and afford to make repayments should there be delays. Note that some lenders won’t offer a bridging loan if the estimated work exceeds a certain amount.
  • When wanting to renovate and rent. A bridging loan could cover you for the purchase and renovations of a property you plan to rent out. This is called a bridge to let loan and can be paid back by refinancing onto a buy to let mortgage. You should submit your buy to let application at the same time as your bridge to let application so you have a mortgage in principle to present as your exit strategy.
  • When purchasing an “unmortgageable” property. If a property is considered uninhabitable by a lender, they may not offer a mortgage. With a more flexible criteria, a bridging loan is another option. You’d need to show you have solid redevelopment plans and the knowledge to put them into practice. Once it’s in a better condition, you can pay back the loan by selling it or remortgaging onto a traditional mortgage.

While lenders can offer bridging loans from around £50,000 up to £15 million, the reason for the loan will determine the amount you can borrow. Often lenders have caps on how much they can loan in each instance.

How a broker can help

Given the reasons you may need a bridging loan are likely to be complex, working with a broker can boost your chances of getting the finance you need to purchase the property you want. Many of the brokers we work with have experience involving bridging loans which means they know which lenders to approach for the better deals.

A broker will also be able to:

  • Negotiate the terms and rates on your behalf.
  • Consult on your exit strategy.
  • If that involves refinancing onto a residential mortgage, they can then compare the whole market and advise on whether staying with the same lender or switching to a new one will get you a better deal.

If buying a property with bridging finance is something you’re considering, get in touch for a free consultation with an expert broker we work with.

What do you need to apply for a bridging loan?

A broker will be able to assist in putting your bridging loan application together but in summary, lenders want to see:

  • A valuation report of the property you’re looking to buy.
  • Documents detailing your income.
  • Proof of your planned exit strategy.
  • Evidence you know how to develop a property (if you’re planning to do so).
  • Credit reports and information on any inaccuracies.
  • A deposit.

Deposit requirements

Most bridging loan lenders offer a 70-75% loan to value ratio, which means you’d need 25%-30% as a deposit. This is slightly higher than for a conventional mortgage and in fact may need to be higher again if a lender views your situation as high risk.

Some, such as Goldcrest and Lowry Capital may require as much as 40% depending on your circumstances but often a higher deposit amount puts you in a stronger position rate wise.

What lenders look for

Applications for bridge mortgages are assessed on an individual basis. Lenders will want to know about your income and outgoings as well as the property you’re looking to buy. Some, such as United Trust Bank, state a minimum amount you can borrow while others will require a minimum income. Even though lenders in this scenario are a little more lenient, ultimately, they still want to know you’re reliable. They’ll be carefully considering:

  • The exit strategy: They’ll want evidence of how you plan to pay back the loan. This could include a mortgage in principle, development plans if you’re renovating a property, or proof your current property is being sold. Less common exit strategies include using a forthcoming inheritance, investments or endowments.
  • Any credit history and debt: Having bad credit doesn’t mean you won’t get the loan but lenders will want to fully examine the reasons for this and know if your exit strategy is to remortgage. That’s because there are fewer bad credit mortgage lenders on the market and it could mean you need to increase your lending term.
  • Your security property: If you’re planning to sell another property as part of your exit strategy, the lender will want to assess that property to determine how quickly it’s likely to sell.
  • Your property development knowledge: If you plan to renovate and sell on, lenders will want to know about your previous experience. Perhaps you can prove you’ve done this before, work in a trade or have family members with expertise. No experience doesn’t mean an automatic no. In fact, certain lenders specialise in this area, but a lack of experience will affect your perceived risk level.
  • Your age: Some lenders have a cap on the minimum as well as maximum ages they’ll offer bridging loans to. For example, the minimum age with Precise Mortgages is 25 years old while it’s 21 for Lendinvest.

Get matched with a broker for the bridging mortgage market

The most speedy and seamless way of securing a bridging mortgage is to work with a broker who specialises in this type of finance. Understanding that time is usually of the essence in such a situation, they’ll work fast to secure you a great deal by comparing the rates across the market.

Our broker-matching service will connect you to an advisor who is best-placed to support you on this journey, can answer any questions you have and take all the nuances of your personal situation into consideration.

Call 0808 189 0463 or make an enquiry to consult with your bridging mortgage broker today.

FAQs

Does having a bridging loan affect a mortgage application?

It really shouldn’t, however this would really depend on whether you’ve kept up with any interest repayments and your exit strategy has, or is in the process of, working out as planned. All lenders would recognise the need for using this type of short-term finance as a precursor to a mortgage.

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
£
£
£
2 of 3
3 of 3 Send!
Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Get Started