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Unsecured & secured bridging loans

What are secured bridging loans? Find out in our helpful guide.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: November 18, 2021

Customers regularly get in touch to ask us about secured bridging loans, how to get one, and what the alternatives might be. Here, we haven’t just answered that question – we’ve compiled the key info you need to know about secured bridging loans in one place.

What is a secured bridging loan?

Technically speaking, a secured bridging loan is no different to any other kind of bridging finance, as this form of borrowing is only offered on a secured basis.

You can secure a bridging loan against any of the following…

  • Residential properties
  • Buy to let properties
  • Commercial properties
  • Semi-commercial properties
  • Properties to build and renovate
  • Land
  • Non-property assets

Bridging loans are usually secured as a first charge against a property/asset you either already own or are buying with the funds.

Second charge bridging is also available from some lenders, and a small minority may consider third charge.

Can a secured bridging loan be used on an unmortgageable property?

Properties are dubbed unmortgageable for many reasons. Sometimes it’s because they have no bathroom or kitchen, and in other instances, a non-standard build type is a culprit.

Whatever the case, bridging finance can offer a lifeline here as these loans are flexible enough to cover properties that mortgage lenders would refuse to touch until corrective work has been carried out.

A bridging loan can provide the funds you’d need to make the building habitable, allowing you to later sell it off at a profit or seek a remortgage. With bridging loans, the exit strategy is vitally important – and in this case, it would be either the sale of the security property or a remortgage.

How much deposit do I need for a secured bridging loan?

Most bridging loans are offered with a maximum LTV (loan to value) of 75% of the gross loan, i.e. the loan amount with the interest and fees on top of it. Therefore you will still need a deposit of 30-35% to secure a property through bridging finance at most lenders.

Secured bridging loans with 100% LTV

Bridging finance deals with up to 100% LTV do exist, but to qualify for them, you will need to have additional properties or assets to secure against the loan.

Most bridging lenders allow customers to put up extra security, but each property/asset will require individual valuation, and the bridging provider might expect you to foot these bills.

Another potential pitfall to be aware of is the possibility of more than one of your properties or assets being repossessed if you’re unable to settle the loan.

Can I obtain a buy to let property with a secured bridging loan?

Yes, there are lenders who may be willing to offer you a bridging loan to renovate/purchase a property and approve you for a buy to let mortgage once you’re done.

This is called bridge to let, and you can expect a decision in principle on the BTL aspect when the funds are due to be released. The decision in principle will be based on the gross development value of the property and the potential rental income it’s is likely to generate, and an official valuation will need to be carried out to corroborate the figures.

You will need to meet the standard criteria for a BTL mortgage as well as a bridging loan to qualify for this product, and LTV will be capped at 75% at most lenders.

Can I get a secured bridging loan in a Limited Company?

Yes – bridging loan applications for Limited Company borrowers are treated similarly to buy to let Limited Company applications by most lenders.

The Ltd Company doesn’t need to be a special purpose vehicle, but it may increase the number of lenders you can approach if it is. Bridging finance rates are usually no different for Limited Company borrowers.

Secured bridging loans for commercial properties

As we’ve already touched on, bridging on commercial properties is doable but some lenders may request a business plan to assess the viability of the property’s commercial aspects.

Some lenders place restrictions on certain commercial property types, such as petrol stations and restaurants, due to the increased risk.

There are, however, specialist providers who are happy to take a punt on these projects, as long as the exit strategy is strong. LTV is usually the same as for residential properties – capped at between 70-75% – but it may be lower at 50-60% if the deal is particularly high risk.

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How to get a secured bridging loan

The best way to get the ball rolling on a bridging finance application is to seek whole-of-market advice. That way, you’ll have access to every provider offering the best deals for somebody in your circumstances. The bridging loan brokers we work with have access to the entire market and can connect you with the right lender if you make an enquiry.

What documents will I need to produce?

For a bridging loan, most lenders will likely request number of the same documents as a mortgage provider (although less paperwork is generally needed), including the following…

  • Bank statements and wages slips: To prove your financial situation – although, in some cases, it may be possible to get a bridging loan without income, such as when you have a good security property to sell to settle the loan.
  • Accounts: If you’re applying for the loan through a company these may be required.
  • Evidence of the exit strategy: This is of paramount importance. If the exit strategy is a remortgage, the lender may request an agreement in principle – or proof that the property will sell in time to settle the loan, and for enough to pay it off in full.
  • A business plan: Some lenders may request this if the property you’re using the loan for has any commercial elements.
  • ID documents: To evidence your address and ensure you’re in compliance with the lender’s anti-money laundering requirements. Some providers my request up to three forms of ID (e.g. passport, driving license etc).

Bridging loans are swift to arrange, compared to other forms of borrowing such as mortgages, and in straightforward cases it’s possible to have a conditional offer on the table within a matter of days, subject to valuation being carried out.

Getting the best rates on a secured bridging loan

Bridging loan applications are assessed on a case-by-case basis, but lenders are usually more flexible with and reserve the best rates for borrowers with the following…

  • A strong exit strategy:
    You’re unlikely to get a bridging loan without evidencing an exit strategy, and those whose is water-tight are more likely to end up on the best rates. The borrower will look at how likely you are to achieve whatever plans you have for the loan. If your exit plan is to offload a property, they will assess how sellable it is, taking into account factors such as location and any variables that might put off prospective buyers, such as a leasehold or non-standard construction.

Take note: Some lenders are happy to accept ‘non-standard’ exit strategies such as using investments, endowments or inheritance to settle the loan, if the borrower can prove these funds are due to enter their account within a certain timeframe. But for non-standard exits, some lenders charge interest daily, rather than monthly.

  • Clean credit: This is not a deal-breaker at some lenders as there are specialist bridging providers who cater for customers with adverse credit. But generally speaking, a clean credit rating will give you access to a wider pool of lenders, and therefore give you a better chance of finding the right deal for you.
  • Experience in property: Not all bridging lenders insist that the borrower has experience in property, but it will help you gain access to a greater range of providers. If you need the funds for a complex development project, some lenders will insist on property experience and may request evidence of past projects.
  • A good security property: The more likely your security property is to recoup the loan amount plus the interest through sale or remortgage, the more likely the lender is to offer favourable rates. Expect them to determine this based on factors such as location and whether there are any variables that might put off potential buyers, such as non-standard construction or leaseholds.
  • A healthy deposit: Most bridging loan lenders will ask for a deposit of at least 30-35% of the property’s value, but if you’re in the position to put down 40% or more, you may stand a better chance of landing a favourable deal.

Are there second and third charge secured bridging loans?

Bridging loans are most commonly secured as first charges on a property you either own or are buying. Some lenders offer second charge bridging, but at higher interest rates with LTV commonly capped at 70% of the gross amount including the first charge balance.

On a non-regulated basis, some a small minority of bridging lenders might be willing to offer a third charge loan, but it would likely need to be an attractive deal with a water-tight exit.

Can I get an unsecured bridging loan?

No – unsecured bridging loans don’t exist as bridging finance is always handed out on a secured basis, but there are alternatives to you may wish to consider. Including…

  • Unsecured loans: If the reason you’re unable to take out a bridging loan is the lack of a security property/assets, it may be possible to take out an unsecured loan over a short timeframe (as little as 12 months) instead. They can also be arranged relatively quickly, depending on your circumstances, but usually come with high interest rates.
  • 0% money transfer credit cards: If the amount you’re hoping to borrow is relatively small – a few thousand pounds or so – a 0% money transfer credit card could be an option. These allow you to transfer funds into your bank account and borrow interest free for around three years. You will be required to pay a fee levied as a percentage of the loan amount.
  • A buy to let mortgage: If the only reason you’re choosing bridging finance to secure an investment property is how quickly it is to arrange, it may be worth considering a buy to let mortgage as an alternative. At the right lender, it may be possible to complete a BTL mortgage in as little as a month. If you have that much time to play with, this could be a more cost-effective way to secure an investment property.

These are merely a handful of the potential bridging finance alternatives that might be available to a borrower in your shoes. Make an enquiry to discuss which other options are on offer – the whole of market experts we work with can give you the right advice and connect you with the lender best equipped to handle your application.

Speak to a secured bridging loans expert

For further information about secured bridging loans and get the ball rolling on your application for one, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here. Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t change a fee and there’s no obligation or marks on your credit rating.

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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!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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 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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