Residential Bridging Loans
Learn More About Residential Bridging Loans
If you are looking for short-term property finance in order to bridge the gap between selling one home and purchasing another, then a residential bridging loan allows you to act fast when faced with tight timeframes.
Residential bridging loans are often used as an alternative to a traditional mortgage. Offered on an interest-only basis, they are designed to be quick and flexible and provide peace of mind when it comes to property transactions.
What is a residential bridging loan?
A residential bridging loan is a type of short-term finance solution which is used to help you secure your new home while you wait for your old property to sell. It bridges the gap between having a fixed finance solution in place, such as a mortgage.
A residential bridging loan is a secured loan, meaning your current property or the property you intend to sell will be used as assurance for the loan. Having a viable exit strategy in place is essential for ensuring you can pay back the loan and protect your assets.
When should I use a residential bridging loan?
At Bridging Options our residential bridging loans can help individuals in a variety of situations. From broken property chains to home renovation or buying at auction, we offer bridge finance when you need it the most.
Here is a breakdown of how you might choose to use our bridging loan solutions:
Fix a broken property chain
Buying and selling property can be precarious, stressful and often leads to heartbreak – especially when a buyer pulls out. But, by taking out a short-term residential bridge loan, you can secure the house of your dreams whilst your current home is still on the market.
Flip a property
When you are buying and selling property quickly, a long-term loan or mortgage arrangement may not be suitable. Therefore, a bridging loan provides you with a quick-fix solution to securing finance and completing your sale.
Buy at auction
Time is of the essence when you purchase a property at auction, as you have just 28 days to complete the process. But, with a residential bridging loan, you can secure all the finance you need before putting a mortgage in place.
Refurbish an existing property
If a house you have bought needs substantial improvements, then a bridge loan can allow you to renovate the property before full capital is available. This type of short-term funding can also be referred to as development finance.
Our residential bridging loan service
When looking for a short-term loan for your residential property needs, navigating the various lenders and their lending criteria can often take time. At Bridging Options, we are here to make accessing residential bridging finance as simple as possible.
At Bridging Options, we arrange residential bridging loans for: –
1. Property owners
A bridge loan is an interim loan in which the equity from a property (or properties) you already own is used as collateral for the down payment towards another. For this reason, we would need to carry out a valuation of your current property and may ask for proof of evidence that you have an offer in principle for a mortgage agreement.
2. Property developers
For those who enjoy renovating and refurbishing property, we often ask for evidence of previous projects to ascertain whether you have a good understanding and track record within the industry.
3. Those who have a non-standard repayment strategies
Types of residential bridging loans
There are two main types of bridge loans that you can choose between:
1. A closed bridge loan
A closed bridge loan requires you to have a set date for repayment at the outset and are usually settled within a matter of months. This means that you have a credible payment plan and can inform us of your exit strategy. This may involve the sale of a property or the securement of longer-term finance such as a mortgage. As this type of bridge loan carries less risk, we are often able to offer better rates of interest.
2. An open bridge loan
An open bridge loan can be taken without a specific end date or an exit strategy in place. This type of bridging loan is much more flexible, often with open ended repayment terms and is commonly used to obtain funds for urgent transactions. As this type of bridge loan carries significant risk our rates for an open residential bridging loan tend to be higher.
Who is eligible?
Bridging loans are great for homeowners and property developers alike, who quickly require large amounts of money for their residential or commercial property purchases. This type of lending does come with a certain set of criteria, including:
Lenders will want to know if you can afford to repay the loan and how you plan to do this.
Most lenders will want to see that you are a trustworthy and reliable borrower and will require a copy of your credit history report.
Your existing property will likely be required as collateral for the bridging loan.
Purpose of the loan
Lenders may want to know what you intend to use the loan for, such as buying a new property, refurbishment or buying at auction.
FAQs on Residential Bridge Loans
To learn more about bridging loans for your residential property needs, take a look at some of our most frequently asked questions below, or get in touch today:
Not all types of bridge loans are regulated by the Financial Conduct Authority (FCA), however, most residential bridging finance is, providing that the loan you take out is secured on property that you, your partner or a close family member intend to or currently live in.
Being regulated protects you from any form of mis-selling and bad advice, amongst other things, and allows you to log complaints to the Financial Ombudsman Service.
If, however, you take out a bridging loan that is secured on a property that you, your partner or a close family member do not live in, it is likely to be exempt from FCA regulations. This is often the case for buy to let properties.
A regulated bridging loan is a type of short-term loan that is available on a property you are currently living in or intend to live in. Regulated bridging loans are good options for residential property purchases as they provide more security for the borrower.
An unregulated bridging loan is a type of bridging finance that is typically used by businesses and experienced property developers. They are often used to purchase an investment property or commercial property and tend to offer more flexibility, but this does come with a higher risk.
At Bridging Options, we can advise and support you when it comes to taking out a bridge loan. We’ll assess your current property assets, guide you through the financial legislation and recommend on a case by case basis how best to secure a residential bridge loan with us.
The amount of money you can borrow is primarily based on your property portfolio and is entirely at our discretion. Please note that we quote a maximum loan to value (LTV) rate, which is calculated by taking the size of the loan and dividing it by the price of the property you are using to secure the bridging loan.
To find out just how much you are eligible to borrow, take a look at our easy to use calculator and receive an instant, no obligation quote via your email or mobile.
When you borrow money for a residential bridging loan, you must have an exit strategy in place. The exit strategy is an agreed-upon process in which you will repay the loan, whether that’s through selling your old home or securing a long-term mortgage.
The rate of interest we charge for your bridge loan is typically repaid in one of three ways:
Monthly interest payments – interest is paid each month and, therefore, not added to the loan balance.
Rolled-up payment – interest is accumulated each month and paid at the end of the term when the original loan is repaid.
Retained payment – the cost of the interest owed is also borrowed as part of the original bridge loan. This total amount is then repaid at the end of the agreed term.
It is important to note that failure to repay the loan could result in your property being repossessed. At Bridging Options, we will keep in regular contact with you to check that projects are going to plan and to make sure that you are on track for repayment.
If you are looking to get a bridging loan for your residential property, then it may benefit you to know the difference between specific terms, such as first-charge and second-charge loans.
A first-charge bridging loan is a type of bridging loan secured against your current property, so long as it has no additional outstanding finance, such as another loan or mortgage. It provides the first-charge lender with primary access to the property if there are any repayment issues. These types of loans are usually more reliable for borrowers.
A second-charge bridging loan is a type of bridging finance that is secured against a property that already has a first-charge loan. This means the lender will have second priority over the property, putting them at higher risk as a lender. The interest rates tend to be higher on this type of borrowing.
Why choose Bridging Options?
Residential bridging loans are a popular and useful form of property finance, but at Bridging Options, we appreciate that comparing different rates and terms can be complex and confusing.
If you need fast access to funds, have a property that is not yet eligible for a mortgage or have experienced previous funding that has fallen through – then contact our experienced advisers today. Our bridging finance team are the best in the business and can offer free advice that is easy to understand.