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Bridging Loans Help Centre

From “What is a bridging loan?” to “What checks will lenders make?” here’s the Tiger Financial Guide to bridging loans and the application process!

If you have other questions about bridging loans and property development finance, our dedicated team of experts are on-hand to provide you with all the information you need to make an informed decision.

Tiger Financial are specialist property finance brokers working with a carefully selected group of bridging loan lenders from across the marketplace. We’re one of the UK’s leading brokers, with over 10 year’s experience in the industry. We are dedicated to ensuring every one of our clients finds the right product and the best rate for their loan.

Everything you need to know about our bridging loans

What is a bridging loan?

A bridging loan is a form of short term finance that is secured on a property asset. The difference between bridging finance and a mortgage is that the loan can be secured against a property that may not be suitable for a normal term loan i.e an uninhabitable property that is to be refurbished, a property who’s title will be changed, or if the class of use of the property is to be changed throughout the course of the loan. In fact there are many different uses for a bridging loan.

Funds are available much more quickly than a mortgage; typically 3-4 weeks, and the bridging loan is often based on the value of the property, rather than the purchase price, which is useful when buying under value or from a receiver/auction house.

Also, the interest for the bridging finance can be rolled up throughout the term, which means there would be no monthly payments to worry about.

What can a bridging loan be used for?

A bridging loan can be used for many different reasons by property investors, such as:

  • Buying under value from an LPA Receiver
  • Purchasing before planning permission
  • Purchase with the intent to change the planning permission
  • Buying at auction so you need finance fast
  • Borrowing against value not purchase price
  • Development and refurbishment
  • Buying with a deferred consideration
  • Developing an uninhabitable property
  • You wish to split the title or amend the title.
  • When conventional credit is refused
  • You need working capital or refurbishment money.
  • You want no monthly payments
  • When you need finance fast
  • You want a non status loan
  • You want to buy an operational property such as a hotel or restaurant, before it has started trading, so need to build up a trading history.

Bridging loans are secured against property or land via a first, second or equitable charge.

How long can a bridging loan be taken out for?

As a short-term loan, they are generally taken out for between 3-12 months, but can be for up to two years.

What is an exit route?

As bridging loans are for the short-term, each client must have a plan in place to pay off the loan. This is known as an ‘exit route’.

What are first and second charge loans?

A ‘first charge’ is the primary mortgage or loan secured against a property. This takes precedence over all other finance secured against it. However, If there is sufficient equity in the property, a ‘second charge loan could be secured against it.

Are loans available throughout the UK?

Yes. Bridging loans and development finance are available throughout the UK, including Northern Ireland.

What is the maximum loan to value (LTV)?

The normal loan to value (LTV) is 70% of the open market value, however there are some select lenders that will offer 75% or even 80% for residential property. Land and commercial property tend to be between 65%-70% LTV.

Who can apply?

Individuals, UK Ltd companies, LLP’s, Trusts and overseas companies can apply. Other ownership structures may be considered.

Will the lender credit check me?

Some do and some don’t. Usually for the cheapest rates, this would involve a lender that does do a credit check. However, there are many non status lenders who offer competitive rates that do not do a check.

What if i have a poor credit history or CCJS?

No problem. The funding is decided based upon the strength of the property asset being used as security, regardless of the profile of the borrower.

Do I need clean credit?

No. A bridge loan is available for all credit profiles.

Can overseas residents get a bridging loan?

Yes. There are a handful of lenders who cater to overseas residents, including for Chinese nationals.

Can I borrow the refurbishment cost?

Yes. Up to 100% of the total refurbishment cost is available, as long as you remain within 70% of the GDV at all times.

How long can I get a bridging loan for?

The maximum loan is typically 24 months.

Do I need to have a mortgage DIP/AIP to prove I can repay the loan?

It depends. If you take out the bridging loan in order to refurbish the property and then sell it, then no, they will not require it. However, if you are buying an under value property from a receiver, with the intent to refinance it and hold as an investment, then the lender may require sight of a suitable mortgage AIP/DIP.

What are the fees and costs when taking out a bridging loan?

Tiger Financial do not usually charge up front fee’s. However, you will need to pay for a valuation, which can be a few hundred pounds for a small residential property, up to several thousand pounds for a high value commercial property. You will also have to pay for your own legal fee’s, as well as that of the lender.

In addition to the valuation fee’s and legal fee’s, you may also have to pay: QS fee’s, asset manager fee’s, specialist report fee’s i.e contamination, knotweed removal, asbestos removal. You will also have to pay the lenders arrangement fee – usually 2%, and in some cases, a Tiger broker fee, which is 1%.

Can I get bridging loan on land without planning?

Yes it is possible, but difficult. There has to be a clear understanding of the strategy, a strong understanding that planning will be attained, and a clear exit strategy of how you will repay the loan.

Can I get a bridging loan for land with full planning consent?

Yes, no problem. Typically funds are available up to 65% LTV, but higher is available on a case by case basis.

What is a bricks and mortar valuation?

The bricks and mortar value is the value of the underlying property asset, excluding any goodwill, hope value or income multiple.

This is a major factor when borrowing to acquire an income producing asset, like a care home or a restaurant. The bridging loan will only be based on the value of the property as if it were a vacant, non operational asset, which can severely restrict the amount of lending available.

When buying BMV, can I get a bridging loan based on the valuation, rather than the purchase price?

Yes, some lenders will lend against purely the value, rather than the purchase price. This is especially useful when buying under value assets or distressed assets from a receiver.

Can you arrange regulated loans?

No. We are not regulated by the Financial Conduct Authority. However we are happy to recommend someone who is.

What is an unregulated bridging loan?

An unregulated bridging loan is where the borrower or a family member will NOT reside in the subject property.

Are there monthly payments?

It depends. You have the option to either service the loan, or to have the interest “rolled up” and deducted from the gross loan, meaning there will be no monthly payments throughout the course of the loan.

What other costs are involved?

For all loans, the borrower will usually have to pay for a valuation of the property, and the lenders legal costs.

Most lenders charge an arrangement fee of 2%, some lenders charge an administration fee, and for unusual deals, they may charge an exit fee when the loan is repaid.

How much can I borrow?

Generally the minimum loan size is over £100,000. The maximum loan size is dependent on the strength of the asset being used as security. There is no realistic upper limit for the right project.

How long does it take?

Depending on the speed of the valuation, and the preparedness of the legal teams on all sides; an offer can be provided with 24 hours and the funds available within 48 hours. The normal timeframe for a bridging loan application is 2-3 weeks, and for a development finance application 4-6 weeks.

Typically the total time is 4 weeks, but can be quicker for straight forward transactions. For very urgent loans, there are private lenders who can offer a quicker funding option, even as quick as a few days.

When to use a bridging loan?

Bridging loans are mainly used by clients that need quick, short-term capital to fund a property purchase. They include those who:

  • Need to complete quickly. This might include property developers, who often have the opportunity to secure a great deal if they can complete quickly.
  • Buy through a property auction. Bridging loans are popular with those buying property at an auction. Here, completion has to take place within 28 days which means traditional financing is not usually an option.
  • Are in a broken property chain. A bridging loan enables a seller of one property to secure their new property before the sale of their existing property goes through.
  • Want to buy an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). A bridging lender will base its lending on the property’s value in its current condition, however. This means the buyer can get access to the property and work on it to make it habitable.
  • Are renovating or developing a current property. A property investor may want to renovate a property within a few months and either sell it on or refinance. A bridging loan can often be the perfect vehicle for this short-term capital requirement.
  • Have to get planning permission. In order to obtain planning permission and secure development funding, the developer may need immediate access to capital.
  • Need a lease extension. When a property has a short lease a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.

What properties can you arrange funding for?

Funding is available for most asset classes, including:

  • Residential property
  • Retail premises
  • Commercial and semi-commercial property
  • Land
  • Industrial
  • Offices
  • Hotels & B&B’s
  • Pubs
  • PBSA Student
  • Restaurants
  • PRS sector
  • Development finance
  • Investment Portfolios
  • Industrial Units
  • Factories
  • Nursing/care homes
  • Mixed use properties
  • Houses of Multiple Occupation (HMO’s)
  • Farms or agricultural property
  • Offshore special purpose vehicles (SPV)

I am self-employed with no accounts. Can I still get a loan?

Yes. Funding is available regardless of the income of the applicant. Interest and fees will be rolled up for the duration of the loan.

What are the criteria for a bridging loan?

The criteria for a bridging loan varies from lender to lender and between property classes. Typically, for a residential property, the criteria is as follows:

  • Maximum loan: 75% LTV based on the property 180 day value.
  • Minimum loan size: £100k.
  • Maximum loan: No maximum for the right deal.
  • Maximum term: 24 months.
  • UK and overseas residents.
  • Can be in personal name or Ltd Co/SPV/LLP and even a SIPP
  • Most property types accepted.
  • Non status accepted.
  • Ex bankrupts/repossession/IVA’s accepted.
  • No proof of income required.
  • No monthly payments.
  • 1st/2nd/3rd charges available.
  • Loans available for UK/Eire and certain EU destinations

Can I borrow in a Ltd company?

Yes. You can borrow in a wide variety of corporate structures, including Ltd Co/LLP/Offshore Co’s and SIPP’s.

Can I repay the bridging loan early?

Yes, as long as you are outside the minimum term (usually 3 months, but can be 1 month). If you pay the loan early, you will have any retained interest returned to you.

How much can I borrow?

It depends on the property, the location and your profile. Typically for residential property you can borrow 75% of the value, and for commercial property 65%. There are some caveats to this, with higher amounts available in certain circumstances.

Are there any monthly payments?

Usually no. Most borrowers prefer to have the interest for the full term rolled up and deducted from the gross loan leaving a net figure. However, if getting the maximum net loan is important, then most lenders will allow the interest to be serviced, assuming you can evidence the ability to do so.

Is a bridging loan different from development finance?

Yes. Bridging loans are used to buy property and sometimes to refurbish them, reconfigure them, or to change the tile or planning. Development finance is when you wish to conduct a heavy refurb with structural work, or build from the ground up.

What is an exit strategy?

The “exit strategy” is industry parlance for the method in which you plan to repay the bridging loan i.e sale or refinance with a mortgage.

Can I get a bridging loan with land with outline planning consent?

Yes. There are a handful of lenders that will lend on land with outline consent.

What is the different between the open market value and 180 day value?

The Open Market Value, or OMV, is the value of the property if there were no time restrictions on selling it. However, some lenders want to know how much it would be valued at if they had to insist on a sale within 180 days, or 6 months. This is so that, in the event they need to repossess, they know they can get their money back in a reasonable period of time.

For normal residential properties, the OMV and 180 day value tend to be the same. However for quirky properties or some commercial properties, this may reduce the value by 10%.

Can bridging loans be used to buy property at auction?

Yes. This is one of the most common uses for bridging loans. Not only is the bridging loan available much quicker than a regular mortgage, the bridging loan can also be based on the property value, rather than the purchase price, which can reduce the amount of deposit you need to put down, if buying under value.

What is a vacant possession valuation?

The vacant possession value or “VP” value, is the value of the underlying property asset, excluding any goodwill, hope value or income multiple.

This is a major factor when borrowing to acquire an income producing asset, like a care home or a restaurant. The bridging loan will only be based on the value of the property as if it were a vacant, non operational asset, which can severely restrict the amount of lending available.

What are the Dos and Don'ts when applying for a bridging loan

DO

Be realistic on the valuation

  1. Property values are often far less when valued by an RICS surveyor for secured lending purposes, compared to the optimistic spin from a vendor or sales agent.
  2. Many lenders offer loans based on the 180 days restricted sales value, which can often be 10-15% less the full open market value, especially while Applying for a Bridging Loan & dealing with commercial assets, land, or those properties that are quirky, niche, or in secondary locations.
  3. You will need to pay for the valuation, which can be a lot more than a short form mortgage valuation report. Also, although you pay for it, it belongs to the bridging lender, so they may not release the report to you until you complete the loan with them, or they decline it.
  4. You will need to buy buildings insurance based on the “insurance reinstatement value”. For some commercial properties, this can be substantially higher than the actual value of the property.
  5. For commercial properties, especially assets such as hotels and care homes, the amount you can borrow are based on the “VP” vacant possession value, or bricks and mortar value; NOT the business valuation. This can be a shock to investors buying properties with high incomes but low asset value.  Occasional exceptions are with assets such as offices in strong locations with good covenants on a long lease.

Be realistic on the timescale

Many companies advertise completions in a matter of hours or days.  This is just marketing spiel and is impossible except in very specific and unusual circumstances. The average time for applying is 4 weeks for a bridging loan. The reasons are:

  1. You have to book a valuation, and then wait for the report to be received. The market norm is 10 business days from inspection, although some surveyors can do 5 days or less for more straightforward residential properties in locations with good comparables.  Some lenders offer a no valuation option for low LTV’s when secured against this type of property.
  2. The lender needs time to review the report and discuss with their credit/risk/asset manager/director; then depending on the contents, they may require supplementary information from estate agents/solicitors/QS/specialists/council/planning officer etc before they give the green light.
  3. The deal then gets passed to the legal team. Very few solicitors are motivated to force your deal through ahead of their other commitments. Invariably the client’s solicitor is the slowest, due to being the least motivated in the chain.
  4. Searches can take a long time to come back. In some areas and boroughs, they do not have computerised records, so it can take 3 weeks for your solicitor to receive the search. NB: when doing a refinance, some lenders will accept search indemnity insurance instead.
  5. Redemption statements: when redeeming an existing facility, or adding a second charge, getting the redemption statement can also take 1-2 weeks with certain lenders.

Choose your solicitor very very carefully

The smooth running and efficiency of your transaction will be most heavily influenced by the experience, motivation, responsiveness and professionalism of your solicitor. The lender’s solicitor is motivated because they want to keep the regular business from their client. You are motivated because you want to do your deal. The bridging loan broker is motivated because he wants to get paid. However, your solicitor gets paid regardless, you are just one of many clients, and he or she probably doesn’t give a fig whether your deal completes or not, or whether it happens in 3 weeks or 3 months. You must choose wisely, or it can be a very painful process.

  1. Before applying for a bridging loan, Ask your bridging broker for a recommendation. Someone he has worked with before and who he knows can perform efficiently and professionally.
  2. Ask the lender for a recommendation.
  3. The solicitor must specifically have experience of bridging loans. There are some unique aspects to bridging that need careful consideration, not least of which is the speed.
  4. Don’t use a small one-man-band firm. Due to anti-money laundering regulations, most lenders require at least 3 “SRA Approved Managers” in the office. This can be found on the Law Society website.
  5. If your solicitor takes 24+ hours to respond to every single email or is so busy they can only be contacted via their receptionist at limited points in the day, then they are not suited for bridging. They must be responsive, contactable on their mobiles, and able to reply on email within an hour or two (or quicker).  No room for sleepy solicitors with comfy slippers on in bridging.  Responsive, pro-active, energetic, thinking ahead for problems, anticipating the next steps; that’s what you need.
  6. Whoever you choose, make sure they call for the searches and redemption statements as soon as possible.

DON’T

Hide things from the lender during the application

Lenders have advanced systems to underwrite deals. They will find out all the foibles, warts and background to their prospective borrowers. When applying for a bridging loan you should:

  1. Be honest about your credit past. There’s a lender for every credit profile out there. It just saves everyone time if you disclose your full background at the outset. Sure, you may pay slightly more, but at least you will get your loan as quickly as possible and will save on cost and disappointment later in the process.
  2. The source of any cash deposit will be investigated thoroughly. You should be able to evidence the history of how the cash was generated. This is a critical point that should not be taken lightly. Lenders will decline a deal they cannot get complete surety on the source of the funds.
  3. Any bad press in the past? Any disputes with business associates, court cases, criminal cases, being struck off? If it’s on the internet, anywhere, they will find it. Let your broker know upfront to save pain later.

Forget to plan your exit

As part of the loan application, you will be asked to explain how you are going to repay the loan. In most cases, the bridging lender will ask for some form of evidence. This can be:

  1. Mortgage AIP/DIP to demonstrate the ability to refinance the bridge after the term.
  2. Listing the property for sale prior to drawing down the loan, or within a certain time frame before the loan expires.
  3. An LOI or exchange of contracts from an incumbent purchaser.
  4. A development finance term sheet if buying land or a PD conversion etc.

Keep your lender in the dark if you encounter problems or delays

Most lenders have experienced property and finance professionals, often with entrepreneurial management teams behind them. They know business isn’t easy, and things can go wrong from time to time. If you think you’re not going to redeem the loan within the timeframe expected, you should do the following without delay:

  1. Speak to your bridging finance broker. They may have a good relationship with the lender, so can guide you on the best course of action.
  2. Let the lender know as soon as you know there could be a problem; the earlier the better. They will work with you to find a solution.
  3. Plan for contingency. Ask your broker to look at alternative funding options, such as a refinance with another bridging lender.
  4. Ask for an extension. Most lenders will allow an extension if they understand what happened, and it makes sense to do so.
  5. Be prepared to pay some more fee’s. This is still cheaper than going on to penalty interest, which with some lenders, can be up to 5% per month.
  6. Don’t keep it to yourself.

Our loans are non status and based solely on the market value, regardless of purchase price.

The bridging loan application process

1. Getting Started

Once we have spoken to the lender and received the high level indicative terms by email, if you wish to proceed, please simply confirm by email or by giving us a call so that we can proceed to the next step.

3. The Valuation

As soon as the funds arrive with the lender, they will liaise with the appointed RICS valuer, and you, to arrange the fastest and most convenient appointment for the valuation. Some well known valuers are noted below.

5. The Funds are released

As soon as the legal paperwork is completed, the funds will be available for drawdown.

2. The agreement in princible

Once you give us the green light, we will send you the required application forms for you to complete, and request a copy of your passport and proof of address. We may also ask for your credit report if you have any credit issues that we should know about. Once these documents are received, we will send them to the lender so they can issue an Agreement in Principle or “AIP. This document sets out the basic terms of the loan. If you agree, the lender will then request the fees to instruct the valuation.

4. The solicitors

Once the valuation report comes back after a few days, the solicitors will be instructed to complete the legal process. The borrower is obliged to pay for these costs, so your solicitor will need to send an undertaking to the lenders solicitors that you will pay for these fees.

6. That's it

It really is that simple to get a bridging loan. The process usually takes 2-3 weeks, but can be done quicker if required.

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