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What to Look for in a Bridging Finance Broker

How to find the right bridging finance broker based on your personal circumstances.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 21st February 2020 *

The lending policy for bridging loans is vast, and since most brokers have limited experience with this product, the market can be something of a minefield.

If you’ve found this to be the case, don’t worry – there are many specialist bridging finance brokers who can help find you secure the capital you need. But how do you find the right broker for your needs, and what do you need to look out for?

This article will answer those questions and more, including:

The advisers we work with are regulated by the Financial Conduct Authority (FCA), so they can provide you with accurate, trustworthy advice catered to your personal circumstances.

Make an enquiry and we’ll match you with someone shortly.

What types of bridging finance brokers are there?

Just like with mortgages, there are bridge loan companies who specialise in catering for borrowers that fall into niche categories, and the same applies to brokers. We can connect you with experts who have specialist knowledge of the following…

Bad credit

Some bridging finance companies are wary of customers with bad credit. As these loans are interest-only, the exit strategy is key, and if the applicant is planning to settle the final amount at the end of term via a remortgage, having adverse credit could jeopardise that.

Underwriters will also be mindful of the possibility of further adverse during the loan term.

If you’re credit rating is less than sparkling, that doesn’t mean bridging finance is off the table, as there are brokers who cater for customers with the following against their name…

If you have a marketable property, a strong exit strategy and an achievable plan for the funds you’re applying for, there are lenders who may be willing to take a risk on you, despite your adverse credit.

It may also help your cause if the bad credit has been on your file for a while and is one of the less severe forms of adverse (e.g. a missed mobile phone bill payment rather than a recent bankruptcy or repossession).

If you’re looking for the best bridging loan companies for borrowers with bad credit, make an enquiry and the whole-of-market brokers we work with will connect you to them.

New investors

Some lenders might refuse to lend to first-time bridging loan borrowers and applicants with no experience in the property market, unless it’s an exceptionally good deal with a water-tight exit strategy. Therefore, having experience will usually help you get better rates, especially if the funds are for a complex development project.

Once again, though, the door to bridging finance won’t necessarily be off-limits to you if you’re a first-time developer, investor or landlord. There are providers who have no problem with inexperienced applicants, basing their lending decision on the potential of the investment, your exit strategy and the other factors we’ve outlined above.

If you’re in the market for bridging finance but have limited or no experience in property, get in touch. We work with brokers who specialise in inexperienced borrowers and they can connect you with the right bridge financing companies for applicants in your situation.

Non-standard property

Certain bridging lenders might turn applicants down for a loan based on factors related to their property. Generally speaking, they will want it to be as marketable as possible, especially if your exit strategy is to sell up. Some will be wary if it’s a non-standard construction property, on a short leasehold or in close proximity to a commercial site.

Similarly, if you’re planning to use to funds to renovate a shell of a building and convert it into residential, some providers will say no if they think your plans are achievable.

With a specialist broker on your side, though, it may be possible to find a bridging loan company that will overlook property issues if other criteria is met.

Commercial property

Again, not all lenders will be on-board if you’re hoping to use the funds to secure commercial property.

Some providers won’t give out capital for premises such as petrol stations and restaurants due to the added risk they’d be taking on, others cap loan-to-value at 50-60% for these deals, offer less favourable rates and carry out more stringent checks.

A specialist bridging broker, however, can connect you to a lender willing to offer bridging finance for business purposes, and these providers usually offer capital at the same loan-to-value (LTV).

2nd charge bridging loan

If, for example, you took out bridging to pay off your mortgage, the mortgage debt would be settled and the new loan would be secured against your home as a first charge debt.

If you took out bridging finance as a second mortgage, in addition to the one you’re already repaying, it would be classed as a 2nd charge.

A limited number of bridging providers will lend under these circumstances, but 2nd and even 3rd charge bridging loans do exist - you just need access to the whole of the market and a specialist broker to find them.

The few lenders who offer 2nd charge bridging rarely go higher than 70% LTV and will likely be more cautious of bad credit. Generally speaking, you can expect to pay higher rates for these loans, but the advisors we work with might be able to find you a favourable deal.

Make an enquiry and we’ll match you with someone shortly.

100% loan-to-value

As we’ve already covered, bridging providers cap LTV at 70-75%, but with a whole-of-market broker on your side, it may be possible to find a bridging loans company that offers 100% loan-to-value under specific circumstances.

The minority of lenders who offer these will expect you to put up extra security against the loan, such as properties or assets you already own.

Although this increases the risk for the borrower (since there will be more at stake if you default and the interest rates are often higher), you’re chances of locking down the most favourable deal will increase dramatically with whole-of-market access.

Why should I seek advice?

Given the size and scale of the bridging finance market and the fact that most brokers are relatively inexperienced when it comes to arranging these loans, consulting with an expert in the field is essential to find the right lender offering the best rates for you.

Bridging finance applications are judged on a case-by-case basis, and if you go to the wrong lender, you’re running the risk of ending up with an unfavourable deal or not even being accepted for one at all!

Which companies offer the best rates?

Bridging loan companies reserve their best rates for borrowers with the following…

  1. A strong exit strategy
  2. Clean credit
  3. A good security property
  4. Property market experience
  5. A deposit of 40% or more (30-35% deposit is usually the minimum for bridging)

If you lack all/some of these credentials, only a specialist broker can find you the best deals.

Bridging loan LTV

Most lenders cap loan-to-value at 70-75% on bridging finance. Ones which go higher than this do exist, but you may need a specialist broker to find them.

Bridging finance fees

Bridging loans typically come with high interest rates. On top of that, there can be hefty arrangement fees, and in some cases, exit costs. A specialist broker with whole-of-market knowledge may be able to help you find a lender where these extra costs are competitive.

Whether your application is approved

As we’ve already touched on, bridging applications are assessed on a case-by-case basis and whether yours is successful will ultimately depend on how viable your exit strategy is and how high the risk to the lender is.

Some providers might be willing to back certain projects, while others will shy away from them (some won’t lend for commercial property, for example). A specialist broker can help you find the lender most likely to say yes to you.

If you’re in the market for a bridging loan, get in touch. We work with expert brokers who would be more than happy to connect you with the best bridging finance companies for someone in your circumstances.

Can a broker help secure regulated and unregulated finance?

Although there are many niche sub-categories within the bridging finance sector, the loans themselves can be broadly split into two categories…

Regulated bridging loans

These are secured as first or second charges against a property which is currently or due to be occupied by the applicant. They are regulated by the Financial Conduct Authority (FCA), giving the borrower additional protection against poor advice or mis-selling from lenders and brokers.

Unregulated bridging loans

This is basically any bridging loan used to purchase an investment or commercial property, including a buy-to-let. These are not regulated because commercial lending needs to be more flexible and tailored to the individual.

Which should I choose?

If you’re an everyday borrower looking for bridging finance for a residential property you’re planning to live in, FCA regulated bridging loan brokers and the protection they come with is the way to go, and the advisors we work with can help you find the right one for you.

Commercial borrowers, however, should look for non-regulated providers for the extra flexibility they offer. Many brokers are solely non-reg as they don’t have the permissions or business know-how to set up in a regulated environment, but we work with ones that do.

Make an enquiry to find out more.

What fees to bridging loan brokers charge?

Broker charges are not uncommon in the bridging finance sector. Some will charge you an arrangement fee of around 1% for setting up the finance, as well as administration costs, but others will bill you for even more than this. You should avoid high upfront fees that are non-refundable, because with whole of market access you may find better alternatives.

We don’t charge a fee for connecting you to a bridging finance broker, and the ones we refer you to will only expect one upon success, or will refund any upfront costs you footed if they’re unable to help you out.

Speak to an expert bridging finance broker

For further information about finding a bridging finance broker and get the ball rolling on your application for one, call us on 0808 189 2301 or make an enquiry.

Updated: 21st February 2020
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FCA disclaimer

*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.

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