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A Guide to Getting the Cheapest Bridging Deals

Find out how to get the best bridging loan rates in the UK

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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: 6th September 2019 *

Bridging loans can be useful for landlords, developers and homeowners who need to get hold of money fast. But how do you go about finding the best bridging deals when time is of the essence? 

We’ve created this article to tell you everything you need to know about bridging loan interest rates in 2019.

The following topics are covered:

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Bridge loan rates in the UK

Bridging loan interest rates in the UK tend to be higher than for other forms of borrowing, such as mortgages. 

Since bridging loans are offered on a short-term, interest only basis, the rates are usually expressed as a rate per month, rather than per year like other forms of borrowing. 

For example, if you were to take out bridging finance at 1.5% per month it sounds low, but actually translates to an annual percentage rate (APR) of 18%.

Similar to mortgages, bridge loan rates can be fixed or variable.

Fixed rates will be static for the duration of the term, while variable rates can fluctuate, so the amount you have to pay could go up or down.

The way interest is charged for bridging finance can also vary:

  • Monthly: The borrower settles the interest each month and only pays off the balance of the loan amount at the end of term.
  • Deferred/Rolled up: All of the interest and the final loan amount is due at the end as a lump sum. The interest is compounded during the term.
  • Retained: You ‘borrow’ the interest for a specific period and the amount due is calculated at the beginning based on the length of the term, and settled up later.

What other fees does bridging finance come with?

Interest isn’t the only thing you’ll have to pay if you take out this type of finance.

These loans tend to come with high administration fees, including arrangement charges and exit costs. 

You should always establish how much these additional costs will amount to and establish the overall cost before pressing ahead, because it all adds up. If you borrow £100,000, for instance, a 1% arrangement fee and a 1% exit cost would add £2,000 to the overall amount.

How to compare bridging loans

Comparing bridging loan products in search of the best deal can be difficult. The market for bridging finance is vast and every deal is different and assessed and handed out on a case-by-case basis.

Comparison tables are far from definitive as they only provide a rough benchmark of the rates on offer and sometimes give prominent placement to sponsored products.

The best and most reliable way to compare bridging loans is to have a specialist whole-of-market broker do the legwork for you.

The experts we work with will search the entire market for the lender best positioned to offer a favourable deal to a borrower with your needs and circumstances. Call 0808 189 2301 or  make a quick enquiry to speak to someone who can get you the best available deal.

Finding the best bridging loans

Ultimately, your circumstances will be the key to unlocking the best bridging loan terms.  

Although you can get a rough approximation of how much it might cost you to borrow a certain amount using an online calculator, lenders assess borrowers on a case-by-case basis.

The best way to find the best bridging loan deals is through a whole-of-market broker who will be able to take all your personal circumstances into account when they approach potential lenders on your behalf.

The term you’re looking for, the amount you need to borrow and the interest rate, along with fees and costs in setting the loan up, all add up. A whole-of-market broker will be able to gather quotes and compare all these elements to give you the best possible deal.

All the brokers we work with are whole-of-market and will be happy to answer your questions and find the best bridging loan for you. Call 0808 189 2301 and we’ll match you with an expert in bridging finance.

The service is free and there’s no obligation. If you end up arranging your bridging finance through one of the brokers we work with, there’s still no cost to you as advisors are only paid by lenders by way of commission on completion of an agreement you’re happy with.

How much can I borrow for a bridging loan?

We’ve now outlined bridging loan interest rates and highlighted the factors that will help you lock down favourable ones, so it’s time to establish how much you’d be able to borrow.

Certain lenders will refuse to loan you less than £150,000, but some have a minimum loan value of £50,000, others £30,000 and a minority will go as low as £10,000. However, because bridging is flexible, there’s always a chance you can find a lender who will hand over less under the right circumstances.

Do bridging lenders look at my income?

The important thing to remember is, unlike main residential mortgages or buy-to-let mortgages, this is not about your personal income or the projected rental income. If you have enough equity and the right exit strategy, the money can often be borrowed.

What’s the most I could borrow?

The sky is pretty much the limit. Most bridging lenders are flexible enough to impose no strict cap on the maximum they’re able to hand out and deals worth tens of millions and upwards are not unheard of.

The most important factor is the exit strategy, and if yours is water-tight, i.e. guaranteed to pay out the necessary amount within the required timeframe, there’s a chance the provider will consider lending regardless of the amount (within reason, of course).

How much deposit will I need for a bridging loan?

The loan to value (LTV) at most bridging lenders is 75% of the gross loan, but some set it as low as 50-60%, and others will consider going higher (up to a 100%), if you’re able to put up additional assets/properties as security. Most providers are happy with multiple securities but may charge you additional valuation fees in these circumstances.

If you’re buying property with a bridging loan, a deposit of at least 30-35% of its value is typically required, based on LTV including the rolled up/retained interest.

If you’re looking for the best bridging loan provider for someone in your circumstances, get in touch and the advisors we work with will conduct a market-spanning search to find them.

How to get the best bridging finance interest rates

Customers often ask us about typical bridging loan interest rates and fees, and in truth, they can fluctuate and shift at any time. 

The key to finding the best bridging loans with the best rates around is having access to the whole of the market, and meeting the eligibility criteria at as many lenders as possible.

Read on to find out which factors bridging lenders take into account when assessing eligibility, or make an enquiry to talk to a bridging expert over the phone.

How bridging lenders determine eligibility

The key to landing the best bridging loan deals and getting the best bridging loan rates is meeting the eligibility criteria with as many lenders as possible.

Bridging finance providers judge every application on a case-by-case basis, but tend to reserve their best rates for borrowers with the following:

A strong exit strategy

As bridge loans are offered on a short term interest-only basis with high rates, the exit strategy is of paramount importance and is often the deciding factor in lending decisions.

In the vast majority of cases where property is involved, the exit strategy is a remortgage or the sale of the property, so the rates you’re offered may depend on the value of the property and how sellable it is, or how much you’re likely to be able to remortgage for.

If the investment is sound and likely to generate enough capital to bankroll the exit, you will stand a good chance of securing the best value bridging loans, though some providers may be willing to accept ‘non-standard’ exit strategies such as using investments, endowments or inheritance to repay the loan, but may charge interest daily in these cases.

Clean credit

Current bridge loan interest rates may seem high compared to more traditional types of borrowing, but that doesn’t mean finding a favourable deal is impossible.

With a clean credit rating, you’ll stand a better chance of ending up on the best rates. Borrowers with bad credit are too high risk for some lenders, especially if their exit strategy is a remortgage and there’s a possibility of further adverse credit during the loan term.

Bad credit will also shrink your chances of qualifying for a second charge bridging loan, but generally speaking, it doesn’t rule you out of bridging finance agreements altogether.

If you’re seeking bridging finance with any of the above and want a great deal, make an enquiry now and the advisors we work with will help you find a lender who may be able to offer you a lifeline.

Achievable plans for the bridging finance

Interest rates on bridge loans can be a stinger, but if you can prove to the lender that what you plan to do with the funds is achievable, your chances of a favourable deal will increase.

The provider will scrutinise your project to determine whether the investment will be profitable. They’ll look at a number of factors to establish this.

For instance, if it’s a complex development project and you have little experience in property, they’re unlikely to be convinced. Moreover, they will also weigh up the possibility of unexpected delays or costs derailing your plans or the chance that there won’t be enough time to market the property, if your exit strategy is to sell up afterwards.

Then there's marketability of the property. If you can provide evidence that it will sell for a decent amount, your chances of passing the eligibility checks with the lender offering the best rates on bridging loans will likely increase.

If you’ve been turned down for bridging finance in the past or fear that you might be, call us on 0808 189 2301 for a free, no obligation chat and the experts we work with will compare bridging loans and connect you with a lender who may be willing to provide you with capital to bankroll your plans.

A good security property

Another thing that will help you get the best bringing finance rates is having a strong property to secure the loan against. Property type and location will affect its sellability, and if bridging providers are convinced you’ll be able to offload it quickly and easily for a lucrative amount, you’ll have access to the top bridging loan deals, subject to other criteria.

Experience in property development

Industry experience is by no means essential but, depending on the project and the bridging provider, it can help you secure favourable interest rates on a bridging loan.

This may be relevant if it’s a complex development project you’ve taken on. If this is the case, it’s not uncommon for underwriters to request evidence of past deals.

If you’re unsure whether you’d be approved for bridging finance, get in touch and the whole-of-market advisors we work with will carry out a bridging loans comparison and connect you with lenders offering the best deals for someone in your circumstances.

A healthy deposit

When buying property with bridging finance, most lenders will expect you to stump up at least 30-35% of the property’s value for the deposit, but superior rates may kick in if you’re able to put down more than that. The best rates tend to appear when you put in 40% upwards.

Are bridging finance rates different for Ltd company borrowers?

Generally, no. At most lenders, bridge loan rates are currently no different for borrowers who are set up as Limited Companies. The majority will treat these similarly to Ltd company buy to let applications, and may request a personal guarantee from the company director.

To get a bridging loan with the best rates, the Ltd company needs to be a special purpose vehicle (SPV) as lenders prefer this setup, though not all insist on it.

Are bridging loan rates any different in London?

The thing to be aware of if you’re looking for bridging finance in London is that rates are generally no different. 

That said, some lenders have minimum loan/property values so high that only projects in the UK capital will meet the criteria. That means that on property in London, if of the right value, you may have access to more lenders, and thus the chances of the top rate are higher.

If you’re seeking London’s best bridging finance deals, get in touch and the advisors we work with will compare bridging loan rates in the capital and pair you with the lender offering the best deals for someone in your circumstances.

How property type can impact on rates

The most common use for bridging loans is to purchase land or property. They can be used to buy residential, commercial, mixed use and even unmortgageable buildings.

The rates you’ll get when using a bridge loan to secure a residential mortgage are generally the same as other property types in the sense that they are dependent on the usual factors. 

Lenders decide which mortgage bridge loan rates to hand out on a case-by-case basis, but tend to reserve the best rates for borrowers with the following:

  • A strong exit strategy
  • Clean credit
  • A good security property
  • Experience in property
  • A healthy deposit

The exit strategy for residential bridging loans would usually involve shifting the funds over to a residential mortgage.

See the ‘How to get the best bridging finance interest rates’ section for more information about eligibility, including how the above factors impact on a bridging application.

Rates on bridging loans for commercial properties

The rates you’ll get if you’re using a bridge loan to buy a commercial property could be higher, but as long as you evidence a strong exit strategy and have whole-of-market access, a favourable deal is possible. 

However, some providers won’t lend for certain commercial property types like petrol stations and restaurants as they consider them high risk.

The ones which do might cap LTV at 50-60% unless you can prove it’s a particularly good investment and may request to see a business plan to assess the viability of the deal.

What bridging loan alternatives should I consider?

If the interest rates for bridging finance are too high for you, you may be wondering if there are alternatives out there, and the good news is that there are indeed.

Here are three alternatives that might be available if you’re having trouble finding relatively cheap bridging loan rates.

  1. A buy-to-let mortgage: People often choose bridging finance because it is swift to arrange, but if you’re after a development property, it may be possible (and more cost effective) to secure one on a buy to let mortgage in as little as two weeks.
  2. A let to buy mortgage: If you already own a property and have equity in it, you can always release said equity and use it as a deposit for a second mortgage, on an investment property. This is known as let to buy, and it might be more viable for you.
  3. Asset based lending: If you’re a business owner, you can raise capital by unlocking the cash tied up in your assets. Using your existing assets as security from debtors, stock, plant and machinery or property may be more cost effective than bridging.

Get in touch to find out what other options are on offer and receive expert advice regarding the best course of action.

Speak to a bridging loans expert

If you like anything in this article or you’d like to know more, call 0808 189 2301 or make a quick enquiry.

We’ll introduce you to one of the whole-of-market brokers we work with, making sure they’re  experts in the field of bridging finance. 

All the brokers we work with have access to lenders across the UK, so you can rest assured they’ll track down the cheapest bridging loan rates in the UK for somebody with your personal circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 6th September 2019
OnlineMortgageAdvisor 2019 ©

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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