Bridging Loans for Self-Build Houses

bridging loans for self build houses
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    There is nothing quite as liberating as being able to build your own home. Those of us fortunate enough to have this opportunity know full well what a massive undertaking a self build can be.

    Taking out a mortgage for a self build project can be incredibly expensive, which is why considering bridging loans over self build mortgages, may be the most worthwhile development finance for a self build. So what is a self build bridging loan?

    Bridging loans can be used as a source of necessary repayment capital for building a new home, acquiring commercial property, or building a new home on an existing property. Most bridging loans for self builds come with repayment terms between 3 months to 3 years.

    Are you currently wondering if a bridge loan is a viable option for the construction of your new home? Are you trying to decide between bridging loans or self build mortgages? No matter what your particular enquiry may be, this guide will help you determine if a self build bridging loan is best for you.

    Below we will explain all there is to know about these special types of bridging loans, and how we can help you secure your self build bridging finance today.

    Why may a bridging loan be suitable for a self-built house or property?

    In a nutshell, bridging finance can be an attractive prospect, since it provides a great way for those seeking to undergo a self build due to its short term finance benefits. Bridging loans can be secured quickly and come with much less of a commitment than what one would undergo with self build mortgages.

    Self builders seeking to build their own house and perform their own construction process typically have many finance options at their disposal.

    First and foremost, a self build mortgage is the most common type of suitable finance self building enthusiasts seek or those seeking to buy land. But a self build mortgage is not always possible for many.

    A standard mortgage is certainly not always the best route, and specialist finance by specialist lenders such as Bridging Options may provide more money and potentially better interim and final evaluations for builders.

    This is where bridging finance comes into focus. Even if one decides to choose a self build mortgage, bridging loans can also be used to pay for the initial down payment of a stage release mortgage- the choice is yours to make.

    How does a self-build house bridging loan work?

    When using a self build bridging loan, there are some particular considerations that are favored over others.

    One of the most common reasons a self build bridge loan may be used is for those seeking to restore a pre-existing property over purchasing land or undertaking a new project on their own home.

    More often than not, these types of scenarios are commonly seen on properties that most lenders would consider to be unviable for a self build mortgage, due to the needs of having to ensure planning permission from your local authority.

    This usually means the property in question can have a wide range of problems present that prevent it from being considered for a self build mortgage such as uninhabitable conditions or unacceptable living conditions related to plumbing or electricity.

    A bridge loan bridges this gap between interim and final valuations by allowing the release of capital to make the repairs, renovations, or even to secure the capital to get a self build mortgage if the homeowner wishes to build and then finance for the long term.

    You could also use a bridge loan potentially for the entire purchase if you meet the eligibility requirements to secure a large amount of capital. You would need to have a proven track record by either owning an existing home, securing the land purchase first, and not having many outstanding debts.

    All of this corresponds to the lending criteria for both bridge finance and a self build mortgage, but many likely find that bridge finance is sometimes more attractive and easier to navigate than going forward with a build project under the auspices of a mortgage.

    You could also secure bridge finance to pay for build costs if the build costs are going to be sizeable and not covered under a mortgage regulated by the financial planning permission.

    With this in mind, prospective borrowers should think carefully before securing bridge finance since any delays in build projects, regulations by the financial conduct authority or various building societies, or other problems may arise.

    How do bridging loans differ from self-build mortgages?

    You may be confused on exactly how bridge finance differs from a self building mortgage. The easy answer is that bridge finance is much quicker and typically removes the need for a lump sum payment that would come with a mortgage.

    Mainstream mortgage lenders also have a very long list of eligibility requirements for securing a mortgage, and your credit score and report will be scrutinised to a wider degree with a mortgage.

    Therefore, bridge finance allows a borrower to avoid these strict rules in place with mainstream lenders within the mortgage industry.

    Let’s take a closer look at exactly how bridge finance differs from a mortgage for self-building projects.

    Short term

    Bridge finance comes with a very short window of repayment. This sounds alarming at first, and for some it can be, but bridging lenders are usually not going to take a chance on those who do not qualify.

    With that in mind, the typical loan usually has a term of 12 months, but up to 3 years can be granted in some cases depending on the amount of the loan.

    Swifter process

    Unlike a mortgage, bridge finance comes with a rapid approval process and is typically initiated and closed within 1-2 weeks at the most.

    After the initial valuation to determine if you have enough equity to secure the loan being offered, and after the exit strategy and exit fees are settled, you will be given your loan. A mortgage takes much, much longer.

    Potentially lower rates

    Paying interest is a fact whether one decides to go with a mortgage or to secure bridge finance. But the interest rates for bridge finance, although high, do not linger for the better part of 20-30 years as seen with the interest rates on mortgages.

    Bridging lenders can work with you to find the right loan amount to potentially avoid higher end interest rates, but as long as you have a solid exit strategy in place, the interest rates are not going to spring upon you in surprising fashion.

    Can release a great deal of capital

    As long as you are willing to accept liability at your own risk for debt secured bridge finance, a great deal of capital can come your way if it is needed as your project progresses. This is good news if you want to build your home from scratch or want to initiate a massive reconstruction or expansion on the property in question.

    What types of bridging loans are available for self-build?

    There are a wide range of loans available for many different needs. Everything from first charge loan to commercial bridging loans depending on what you need the loan for. But the two main types of bridge loans available are typically an open or closed bridging loan.

    Open bridge loan

    Open loans are by far the most convenient and attractive types of bridge finance loans for many prospective applicants. This type of loan usually has no set date of repayment, and is therefore much more versatile than what is seen with a closed bridge loan.

    Although you can typically expect repayment to be within 1-3 years for certain, this type of loan means that lenders feel secure with your application and exit plans due to absence of other debt, and will be lenient in the term of your loan.

    Closed bridge loan

    Closed loans are a bit different in that there may be other debts in place that affect the current value of security. These loans come with a set date for repayment that is non-negotiable. This can be a good thing for many since it helps you to ensure you have all your ducks in a row before taking on the loan.

    You will also know up front all of the fees and the interest that will accrue during the lifetime of the loan.

    What is the criteria for a self-build house bridging loan?

    Valuation fees, arrangement fees, upfront fees, and other supporting documents and key considerations are things to expect during the bridge loan consideration process.

    Once you begin speaking to an established current appointed representative, your rep will begin to go through the process with you one step at a time. It is best to speak to a rep and not assume unsolicited advice is accurate, since this does not constitute financial advice with authenticity.

    A lender will typically want to know how much you wish to borrow as well as a full summary of your plans for the loan. The purchase price of your property, and structural warranty, and other valuations will also be used to establish current risk assessments.

    Your overall expenditure cross checked with your credit will also be examined, but do not think that adverse credit will automatically affect the decision.

    Once this and your exit plans are analysed, a decision will be made usually within 1-2 weeks.

    How to secure a bridging loan for self-building house projects

    A great place to start would be to have a RICS qualified surveyor come out and look at your property to create a current assessment of its value and any risk.

    Make sure that all of your criteria details are in top order and present all of this in a promising and professional context to the lender.

    Most important of all is to know whether or not your collateral- which is typically your home or a piece of land- is attractive enough to ensure a lender will want to take the risk of approving your loan.

    When can I access the self-build house bridging loan?

    After about 24 hours of your application and meeting, you will likely hear back from your lender to inform you if your loan is moving forward.

    After this, it usually takes about 1-2 weeks to go over all documents and sign your forms pertaining to your loan and agreement.

    Frequently asked questions on self-build bridging loans:

    Can I get a bridging loan for a new build?

    Yes, you can certainly get a bridging finance loan for a new build. One of the great things about this special type of loan is that there are many different options that can be used for collateral. These include but are not limited to:

    – Various types of investment
    – Pensions
    – Works of fine, art valuable cars, valuable pieces of personal property

    Can I get a bridging loan if I don’t own a property?

    While owning a property is the most common type of security required by many lenders, there are some lenders that will consider other types of collateral as mentioned above. Therefore, owning a home or property is not a must for bridge finance even though it is the most typical type of bridge loan that is put forward.

    Do I have to have insurance and warranties before applying for a self-build bridging loan?

    In most cases, yes. Most banks are going to want you to show proof of insurance and structural warranties before they will sign off on the bridge loan. With that in mind, this is more indicative of mortgages than bridge finance, so this is not always a requirement.

    Is a self-build mortgage better than a bridging loan?

    This ultimately depends on what you find to be most acceptable. Mortgages are certainly not for everyone, and the good news is that you can go forward with a bridging loan if you want to do self builds exclusively.

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    Commercial bridging loans offer a short-term funding solution for businesses, landlords, property developers and land owners in the UK.


    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.

    Development Loans

    Development finance offers short-term funding to those who need help with the purchasing and/or building costs of a construction project.

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    Why choose Bridging Options for your self-build house bridging loan?

    At Bridging Options, we only consult with lenders and brokers regulated by the Financial Conduct Authority in addition to those who are well-versed to offer financial advice when it comes to planning permission regulations for self builds.

    We can ensure that whether you are approved or not, we can offer the best advice and connect you with the lenders that are exclusive to self builds to save you time and stress in what can be a wide open financial field.

    Contact us today and let us help you secure the self build loan that works best for you.