We are asked all the time about the maximum loan to value (LTV) for bridging finance so have collated everything you need to know about bridging loans with higher loan to values (up to 100% LTV) and how to boost your chances of getting one.
Most bridging finance providers impose a strict loan to value (LTV) cap, but there are circumstances where lenders may be willing to offer this product with a 100% LTV.
To put it simply, a 100% bridging loan is a loan from a bridging provider that covers the total value of the property or asset you want to secure.
They are uncommon, as bridging loans usually come with a max LTV of 75% of the gross loan, i.e. the loan amount with all of the fees and interest added.
Borrowers usually need to stump up a 25-30% deposit themselves, so if the property was valued at £200k, the maximum loan at 75% would be £150k.
How can I get a 100% bridging loan?
Some lenders will offer 100% bridging loans under specific circumstances, and the key to getting one is having whole-of-market access and extra security to safeguard the loan against - without the latter, landing a bridging finance with 100% LTV is unlikely.
That extra security could be a property (or properties) you already own and have equity in. If you were to safeguard a bridging loan against them, select lenders may offer you a 100% bridging finance deal, allowing you to snap up the property without a deposit.
Numerous bridging lenders will gladly allow borrowers to put up multiple securities as a way around their usual LTV cap, and other assets besides property may be considered.
If you have no other security, and no deposit, then it’s unlikely a lender will offer you a bridging loan to 100% of the property value.
Are there risks I should be aware of?
Whether a 100% LTV bridging loan is a good idea depends on your needs and circumstances but there are potential pitfalls to be aware of.
For instance, if you default on the loan, whatever assets or properties you’ve used as security will be at risk of repossession, plus, fees are often higher for 100% LTV bridging loans since each security asset/property will require its own valuation.
As we’ve already touched on, you will need whole-of-market access to track down the lenders willing to offer 100% bridging loans, and the advisors we work with have exactly that, so get in touch and one of them will connect you to the right provider.
Bridging loan eligibility
If you’re hoping to convince a bridging finance provider to offer you a loan with a higher LTV ratio than the norm, meeting the general eligibility criteria for bridging loans always helps.
Bridging finance applicants are always assessed on a case-by-case basis, but the majority of lenders reserve their best rates for borrowers with the following…
A viable exit strategy:
Bridging providers often base their lending decision on the applicant’s exit strategy, as this is of paramount importance. Bridging loans are offered on a short-term, interest-only basis so how you plan to settle up at the end of term is key. This usually involves a remortgage or the sale of a property, and the lender will expect you to prove that your exit plan is realistic and likely to generate enough capital to pay off the outstanding loan sum.
This isn’t a deal-breaker for some lenders, but at others, it will help you gain access to the best deals since they will view you as lower risk. Certain lenders are cautious of bridging borrowers with adverse credit if their exit strategy is to remortgage, and some are wary of the possibility of further adverse during the term.
Experience in property:
Again, this isn’t always a deal-breaker, but some bridging lenders will view you as lower risk, and therefore offer you a better deal if you have experience in property, especially if the project is a complex development.
A good security property:
If your exit strategy is to sell up, expect the lender to scrutinise the primary property you’re securing the loan against. They will want to determine how quickly it will sell and how much for, based on factors such as location and property type (non-standard construction is less sellable, for instance). Obviously, the quicker it will sell and the more capital it will generate, the better.
If you have extra security to safeguard the loan against and meet some or all of the above criteria, your chances of landing bridging finance with 100% LTV will rise.
Make an enquiry and the experts we work with will help you find the lender most likely to offer these terms to a borrower in your circumstances.
Can I get bridging finance at 85-90% LTV?
Yes, in some cases specialist lenders will consider offering deals outside of their usual loan to value parameters (around 75% max on average), and the key to convincing them to take that risk is putting up extra security and meeting their criteria, as we’ve discussed above.
If you’re after a bridging loan with higher LTV, get in touch and the advisors we work with will help you find the lender offering the highest percentages to borrowers in your shoes.
Taking a bridging loan at market value
One way to borrow above the LTV cap, without the need for additional security, is to take out bridging finance based on valuation other than the purchase cost.
It may be possible to find a lender who is willing to offer you a loan based on the property’s market value.
The market value is the best price you can hope to receive for the property once it’s on the open market.
The forecasted sales price is rarely an exact science, but is typically higher than the purchase price, so the amount you’re able to borrow may increase.
Be mindful that some surveyors provide valuations restricted to a 90 or 180-day marketing period (what price they’d likely get if they had to sell it within this time).
Even a bridging lender that uses the 180-day system may refuse to rubber stamp a loan if the 90-day value is too low.
Make an enquiry to speak with an expert advisor for more information about how this could impact your application.
Do I need a regulated or unregulated bridging loan for a higher LTV deal?
That all depends on the purpose of the funds and the status of the property. Regardless of the LTV, you should be aware that you will only need a regulated bridging loan if the funds are to invest a property that you either live in or are planning to live in afterwards.
Regulated bridging loans are for residential properties and they are overseen by the Financial Conduct Authority (FCA), giving the borrower extra protection against mis-selling and bad advice, among other things.
If you need bridging finance for investment purposes, an unregulated loan is what you need.
These are more flexible and tailored to the needs of the individual.
For instance, if you want to purchase a buy to let property, an unregulated bridging finance lender may allow you to take out a loan based on rental potential, rather than your income.
Speak to a bridging loans expert
If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.
Then sit back and let us do all the hard work in finding the bridging finance lender with the right expertise for somebody with your personal circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.
*Based on our research, the content contained in this article is accurate as of 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 info 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 who 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.
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!
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