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Welcome to Loan.co.uk, your top destination for bridging loans in the UK. If you’re seeking a bridging loan or want to understand what a bridging loan is, you’re in the right place.

A bridging loan is a short-term financing solution designed to bridge the financial gap between immediate cash needs and securing a long-term financing option. It acts as a financial stepping-stone, eliminating the wait associated with traditional loans, sales, or paperwork.

Frequently, bridging loans prove invaluable in scenarios like buying a new property before selling the existing one, managing a short-term cash flow glitch, or facilitating property renovations. In essence, bridging loans cater to a myriad of financial needs.

Q What is a bridging loan?
Q How does a bridging loan work for home and property owners?

1. Downsize to a more affordable place
If you are looking to move to a smaller or less expensive home, you could use a bridging loan to secure the smaller property whilst you sell the existing home.

2. Secure a new home
When there is a delay between the sale and completion dates, a bridging loan can help you to secure a purchase without having to wait for the sale of your existing property to go through.

3. Repair a broken property chain
A bridging loan can enable you to purchase a new home even if a buyer in the chain drops out.

4. Buy a property at auction
If you buy a property at an auction, you usually need to pay a 10% deposit immediately. The rest is usually due within 28 days. They’re useful for completing the purchase whilst you arrange a long-term solution, either a through a quick sale or a mortgage.

5. Build your dream home/grand design
A bridging loan could help you achieve that dream of building your ideal home.

6. Easy a temporary cash-flow issue
You could use a bridging loan to release equity in your family home. For example, for use in a probate case where inheritance tax needs to be paid on a property, or a divorce settlement.

Q How do they work for property developers and landlords?

1. Buy property to develop at auction
Completion is required to happen within 28 days of the hammer going down, so bridging finance can secure the property until it’s either been resold, refurbished or re-financed. This can be for both residential properties and commercial properties.

2. Buy a property that’s considered uninhabitable
If a property is deemed uninhabitable, it can be hard (if not impossible) to find a lender willing to provide a mortgage. A bridging loan can provide the money needed to fund the building work required to make a property fit to live in, enabling it to qualify for a mainstream mortgage.

3. Renovate a property before a sale
Property investors find a refurbishment-bridging loan useful if they need to fund expensive repairs and/or property development before putting it back on the market with the aim of selling it for profit.

4. Ease a temporary cash flow issue
A bridging loan can be used to capitalise on market conditions and discounted investment opportunities.

Q How does a bridging loan work for businesses?

1. Raise capital
Bridging loans can be secured against land and property so that companies can raise money in the form of short-term finance and improve their cash liquidity.

2. Expand quickly
If you needed a new, expensive piece of machinery or extra space to fulfil a large order, by securing a loan against land/property, a bridging loan could provide the funding.

3. Tax liabilities
Businesses can use a bridging loan if a tax demand is made and the amount cannot be accessed otherwise within the required timeframe.

4. Meet business obligations
Bridging loans can be used for short-term funding to overcome temporary financial issues.

Q What is the most I will be able to borrow?

Most lenders will lend between 65% to 80% gross (This is the amount paid out, plus interest rolled up and fees added) of the value of the property (LTV), but some will go to 95% or even 100% depending on the circumstances and if there is additional security in place.
Bridging loans are a stopgap solution before longer-term financing is put in place (for instance, funds from selling an asset such as a house to be used as a deposit on a new mortgage for the new property).
Let us say you needed funding to buy a new home before the sale of your existing property. Your current home is valued at £670,000 with an existing 1st mortgage of £335,000. The new property is £900,000 and you have £200,000 in savings to use for the purchase of the new home.

By taking a first charge on the new property and a second charge on the existing home, the lender is able to offer you loan of £764,000, enabling you to buy the new home and pay all the associated fees before the sale of your old home goes through.
You would be charged a fee of around 2% of the advance and interest would apply each month, but this is just added to the loan. Once the exiting home is sold, the bridging loan (including fee, interest and the commission for Loan.co.uk) is settled.

Q Do I need to have a deposit for a bridging loan?

Q What will lenders review in particular before approving my loan?

1. Plan to repay the loan
The key question for lenders is, “How do you plan to raise the finances for repaying your bridging loan?” The answer is known as your ‘exit strategy’. Examples of exit strategies include the sale of a property, sale of other assets or refinancing. Lenders prefer it if you know both how and when you’ll be able to make payment, so ideally you’ll have a confirmed completion date.

2. Secured assets type and value
For many borrowers, this will be the current property.

3. Loan-to-value (LTV) ratio
This is the relationship between the amount you need to borrow and the price of the property you’re buying. The remaining percentage of the property’s price comes from other funds (usually the equity you have in your current house). Lenders tend to favour low LTVs as by paying less of the property’s price, they’re taking a smaller risk.

4. Mortgage status
If you’re a homeowner without a mortgage, lenders will offer you a first charge loan (this loan is the first borrowing against the property). If you have an existing mortgage, you could be offered a second charge loan (this is the second borrowing after the mortgage). Second charges attract higher interest rates as they present a greater risk to the lender. That’s because the first charge takes priority should the borrower default, making it harder for lenders of second charge loans to recoup their money.

Q Which type of bridging loan is best for me?

Q How is the bridging loan repaid?

There are two main ways to charge interest on a bridging loan – serviced interest or rolled-up/retained interest.

1. Serviced interest
This pays off the interest owed each month only. The capital (money borrowed) is repaid at the end of the loan’s term. This is also known as monthly interest.

2. Rolled-up/retained interest
The interest payments for the full term of the loan are calculated from the very start. These are then added to the capital to form one total amount that’s due at the end of the loan. This means no monthly repayments. Some lenders will charge interest on the entire capital and interest (effectively paying interest on top of interest). This is sometimes known as deferred interest.

Q How much time will I have to repay it?

Q What are the consequences of failing to repay?

Q What makes Loan.co.uk such an outstanding bridging loan broker?

1. We will quickly help you find the best bridging loan for you and your circumstances.

2. You will receive expert advice from an award-winning broker

3. We will take care of everything, right up until you receive your money

4. Borrow from £10,000 to £100 million

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