The Bridging Loan Application Process

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    If you’re looking for a bridging loan, no doubt you need to secure the funds quickly to cover a short-term gap or capitalise on an opportunity. Knowing where to start and the steps involved can help you prepare and speed up the process.

    The bridging loan application process typically takes between 7 and 14 days but can be shorter. Being well prepared and having a good understanding of the eligibility criteria can expedite the process, as can working with an experienced broker.

    This article will explain the steps involved in the bridging loan application process, including the typical eligibility criteria.

    At Bridging Options, our aim is to cut through the jargon, provide clarity and help you understand the world of bridging finance. We can put you in touch with an expert from our network of bridging loan experts, to help you secure the funds you need for your next property purchase. Contact us now to get started.

    How do bridging loans work?

    If you are reading this article, chances are you’ve done your homework on what bridging loans are and how they work, but here’s a quick summary.

    Bridging loans are short-term loans that provide funding while awaiting long-term financing or the sale of a property. They allow the borrower to essentially borrow money to “bridge” the gap between their current financial need and future income. They are typically used by developers and landlords to buy commercial and residential property, sometimes at auction.

    Bridging loans are secured against property, have higher interest rates than traditional mortgages, and require a clear exit strategy for repayment, such as selling an existing property or securing long-term financing.

    Closed bridging loans have a fixed repayment date, whereas open bridging loans do not. All bridging loans are usually repaid within 12 months, sometimes up to 24 months.

    The Bridging Loan Application Process

    The bridging loan application process can be quite straightforward, providing you have a stable financial situation and meet the lender’s eligibility criteria. It can be even more efficient if you have a good understanding of the process. To increase your chances of approval and obtaining funds in as little as 72 hours, do your research, prepare your documents and exit strategy in advance, and contact an experienced broker.

    Here is Bridging Option’s 9-step guide to the bridging loan application process.

    1. Initial considerations

    First, it’s important to determine if a bridging loan is the right solution. Common reasons for taking a bridge loan include purchasing a new property before selling an existing one, property refurbishment and auction purchases. If you only need to borrow a relatively small amount, a personal loan may be more appropriate, as it will come with more flexible terms and a lower interest rate.

    If you think a bridging loan is the right option, then it’s important to assess your financial situation, such as existing debts and assets, and the value of the property involved.

    Read more about if a bridging loan is right for you here.

    2. Prepare your documents

    To get a bridging loan, you need to provide proof of your financial situation, including monthly income and expenditure. Gather the following documents:

    • A valuation of the property you are buying
    • Details of any outstanding mortgage
    • Proof of identity and address
    • Proof of income, recent bank statements
    • Recent audited business accounts (if applicable) to demonstrate the strength of your financial profile

    3. Devise your exit strategy

    Having a solid exit strategy is crucial when applying for a bridging loan. An exit strategy demonstrates to lenders how the loan will be repaid at the end of the term, such as selling the property or securing alternative financing like a mortgage.

    The plan should consider market liquidity, potential delays, and obtaining a refinancing agreement in principle. If selling a property is part of the strategy, it should be marketed by the time the loan is completed, with regular updates provided to the lender.

    4. Contact a broker

    Using a bridging loan broker for a bridging loan is highly advantageous because brokers have knowledge of the finance market and can access a wide range of lenders and products, increasing your chances of finding the best bridging loan available.

    Your broker can also negotiate on your behalf, potentially securing lower interest rates and more favourable terms than you could get by going direct. Not only that, they will manage the application to expedite the process, saving you an awful lot of time and effort.

    5. Application submission

    Once you have chosen a lender, your broker will complete the application form with detailed information about your financial situation and the property. They will submit it along with the necessary documentation listed in step 2.

    Attention to detail is crucial at this stage. Insufficient or inaccurate documentation can slow down the application process.

    6. Eligibility check and pre-approval

    The lender will assess your application against their bridging loan criteria and arrange for a property valuation. Lending criteria vary, but in general, a lender will look at:

    • The condition and value of your security property, including how much equity you have in it and any outstanding mortgage.
    • The loan-to-value ratio (bridge loans are typically granted at a maximum LTV of 75-80%).
    • Evidence of financial stability, including debt and income.
    • Your experience in property investment or development.
    • The lender’s most important consideration will be your exit strategy. Some lenders may check your credit rating, but it is not always a concern for bridging lenders as long as you have a strong exit plan. That said, a good credit score can potentially speed up a bridging loan application. Read about bad credit bridging loans.

    7. Offer and final negotiation

    If you meet the lender’s criteria, they will issue a conditional offer, including the loan amount, interest rate, terms, and any other terms and conditions. It’s essential that you fully understand the terms, fees, repayment terms, and conditions.

    8. Legal checks and formal approval

    You must appoint a solicitor to handle the legal checks, including title deeds, property ownership, and any existing charges on the property. Once legal checks are complete and all conditions are met, the lender will formally approve the loan.

    9. Release of funds (drawdown)

    Once the legal formalities are out of the way, the lender releases the funds to your solicitor, who then disburses the funds as required (e.g., to complete the property purchase or to your bank account).

    How long does the bridging loan process take?

    The bridging loan application process typically takes 5 to 21 days. In the case of a property purchase, the typical processing time is around 7 to 14 days. However, under optimal conditions, the process has been known to take as little as 72 hours.

    Common delays include slow property valuations, inaccurate or missing paperwork or simply poor communication.

    Conclusion

    Applying for a bridging loan can be a straightforward process if you understand the necessary steps and prepare in advance. First, assess whether a bridging loan suits your needs and gather essential documents like property valuations, proof of income, and identity. A well-prepared exit strategy is crucial, showing how you plan to repay the loan. Contacting a knowledgeable broker can streamline the process and potentially secure better terms. Submit a detailed application, and if you meet the lender’s criteria, you’ll receive a conditional offer. After legal checks and formal approval, the funds are released, typically within a few weeks.

    Contact Bridging Options for fast, efficient bridging finance

    If you are looking to buy your next investment property, Bridging Options can help. We connect borrowers to our network of specialist bridging loan experts who have access to a wide range of lenders. Not only will they ensure you are presented with the best deals available for your circumstances, but they will also oversee the bridging loan application process from start to finish, saving you precious time and avoiding costly delays.

    Contact Bridging Options today, and we will connect you to an expert as soon as possible.

    FAQs

    What determines the bridging loan interest rate?

    Bridging loan rates are determined by several factors, including the loan-to-value ratio, amount borrowed, duration, property condition, and the borrower’s credit history. Typically, bridging loan interest rates are between 0.4% to 2% per month.

    How is interest paid on a bridging loan?

    Interest on a bridging loan can be paid monthly or rolled up and paid in full at the end of the term.

    Another alternative is to retain the interest, where the interest due over the loan term is calculated upfront and set aside from the loan amount. Instead of the borrower making monthly interest payments, the lender keeps this pre-calculated interest portion, and the borrower only receives the remaining balance of the loan. The full repayment, including the retained interest, is due at the end of the loan term when the borrower repays the principal amount.

    The choice depends on the borrower’s financial situation and the specific terms agreed with the lender.

    What is a first-charge bridging loan?

    A first-charge bridging loan is one in which the lender holds the primary claim over the property. In the event of default, the first-charge lender has the first right to recoup their money from the sale of the property. These loans offfer lower interest rates compared to second-charge loans.

    How much does a bridging loan cost?

    It’s important to factor in the various costs of a bridging loan, including interest rates (charged monthly), arrangement fees (typically around 1-2% of the loan amount), valuation fees and legal fees. Some lenders also charge exit fees.

    Read more about bridging loan costs here.

    mark piper bridging loan consultant
    Mark Piper

    I am the Senior Consultant at Bridging Options. I have extensive experience in leading successful sales teams at major UK insurers and founding a start-up mortgage brokerage, I bring expertise in residential and commercial property investments. Through strategic collaboration with industry leaders, I am committed to delivering exceptional service and empowering clients to achieve their property investment goals.

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