Understanding How
Bridging Loans Work
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Discover how bridging loans work, their eligibility criteria, and the steps to secure quick bridge finance.
How Do Bridging Loans Work?
Bridging loans work by offering short-term funding secured against property or other high-value assets. Borrowers typically repay the bridge loan in full once their planned exit strategy, such as selling a property or refinancing with a long-term mortgage, is completed. Here are the key components:
- Borrower Profile: Although due diligence on personal income is limited (except for regulated bridging loans), the borrower should be creditworthy. Clients with adverse media or poor credit history may also be considered, provided the issues are understood and mitigated.
- Security: Borrowers use property (residential, commercial, or land) as collateral. Most bridging lenders consider multiple properties to increase the loan amount or achieve higher LTVs. Other than lenders taking a first or second charge on the property, they may also take a personal guarantee and a floating charge on the borrowing entity if the bridging loan is taken in a company name.
- Loan-to-Value (LTV): Most bridging lenders offer loans up to 75% of the property’s value, though higher LTVs may be possible with additional security.
- Interest Payment Options: Borrowers can choose retained interest (paid upfront), serviced interest (monthly payments), or a combination of both to service the bridge loan.
- Exit Strategy: Bridging Lenders assess your plan for repaying the loan, whether through a property sale, refinancing, or other means.
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*These results are indicative and subject to a full application. Consult an advisor for a full assessment.*
Bridging Loan Case Studies
£8.5 Million Bridge Loan
Aparthotel Conversion
Funding provided to refinance an existing loan and raise additional capital for refurbishment work on a large-scale aparthotel conversion. This project aimed to transform the property into a modern, high-yield investment asset, enhancing its market appeal and profitability.
£8.9 Million Bridge Loan
500 Acre Private Estate
Bridge loan arranged to refinance a sprawling private estate, raise working capital for the business, and provide additional time to sell the asset. The funding supported the borrower in growing their business operations while ensuring the estate was sold at its optimal value.
£3.8 Million Bridge Loan
Place of Worship
Finance secured at the last moment to acquire a place of worship after the original lender failed to perform. The funding enabled the property’s transformation into a functional community space with modern amenities and was later refinanced into a long-term commercial loan.
£6.2 Million Bridge Loan
Vacant Commercial
Bridging loan arranged to provide working capital for overseas business operations for an ultra-high-net-worth client. The property, held via a complex ownership structure, was a large vacant commercial space for sale. The bridge loan enabled the client to secure the right sale price while meeting immediate needs.
£4.7 Million Bridge Loan
Semi-Commercial Property
100% bridge loan secured quickly for the acquisition of a semi-commercial property by leveraging equity from an existing property. The deal facilitated future rental income through combined retail and residential spaces and was later refinanced into long-term commercial mortgages.
£2 Million Bridge Loan
Development Exit
A development exit loan was arranged to refinance a completed development held via an offshore ownership structure. The funding enabled the borrower to sell the flats over time at the right price, avoiding a fire sale. The bridge provided the flexibility needed to maximize returns.
£1.15 Million Bridge Loan
Regulated Residential
Bridge loan tailored for the refinance of a regulated residential property and to raise capital for planning costs for additional homes on the spare land. The funding facilitated the borrower’s expansion plans and allowed time to transition into a development loan.
£2.5 Million Bridge Loan
Land Acquisition Loan
Using equity from existing properties, funding was arranged for the acquisition of land, enhancing planning permissions and providing the borrower with time to prepare for future development opportunities. The deal supported strategic value creation for upcoming projects.
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How to Apply for a Bridging Loan
A simple step-by-step guide to make your application process seamless.
Define Your Purpose:
- Start by identifying why you need a bridging loan—whether it’s to secure a property, refinance, fund renovations, or acquire land. Having a clear and defined goal will streamline the application process.
Speak to a Specialist:
- Consult an experienced bridging loan advisor at Mortgage.One to discuss your requirements, explore tailored options, and get expert advice. Our advisors can guide you on lenders, products, and eligibility to suit your specific needs.
Gather Necessary Documents:
- Details of the property being used as security.
- Exit strategy (e.g., planned sale or refinance proof).
- Personal identification and proof of address.
- Financial documentation (as advised by your advisor).
Secure a Decision in Principle:
- Most lenders offer a Decision in Principle (DIP) within 24 hours, providing clarity on your borrowing capacity and terms. Securing a DIP accelerates the process when you’re ready to move forward with the loan.
Submit Full Application:
- Once you decide to proceed, submit the full bridging loan application along with all necessary documentation. Your bridging loan advisor will coordinate and assist with completing the process smoothly.
Underwriting and Property Valuation:
- During underwriting, the bridging lender evaluates whether you and the property meet their criteria. Simultaneously, a property valuation is conducted to confirm the market value of the security offered.
Bridge Loan offer, Legal Process, and Completion:
- If approved, the lender will issue a formal offer. At this stage, a solicitor handles legal formalities, including property searches, contract reviews, and compliance checks. Once completed, funds are released to allow you to finalize the purchase or refinance.
Tip: To expedite your bridging loan application, promptly instruct legals & valuation, these delays are the most common cause of processing hold-ups.
Why choose Mortgage.One for your Bridging Loan Journey?
- Transparent Fee Structure: Unlike many brokers, we don’t charge you additional bridging loan brokerage fees. Our income comes from lender procurement fees, ensuring transparency and saving you money on your short-term funding needs.
- Proven Track Record: We've successfully arranged significant bridging and property finance solutions, helping clients secure funds quickly for time-sensitive opportunities. Discover our case studies for real-world success stories.
- Strong Lender Relationships: Our extensive network includes bridging lenders, private funds, and family offices, giving you access to exclusive deals and favorable terms, whether for regulated or non-regulated loans..
- Informed Decision-Making: Leverage our bridging loan calculator and expert resources to make confident choices. Analyze LTVs, interest payment options, and exit strategies to tailor your loan to your needs.
- Wide Range of Bridging Options: We compare a vast array of bridging loan deals, whether regulated or non-regulated, to secure the most competitive terms tailored to your requirements. From residential purchases to commercial projects, explore your options with us!
- Specialist Bridging Loan Expertise: Whether you’re acquiring property at auction, refinancing for development exit, or unlocking equity for a new investment, our team understands the complexities of bridging finance.
- Save Time & Secure Deals Faster: We streamline the bridging loan process, helping you from application to approval in as little as a week. Focus on your projects while we handle the legwork.
- Dedicated Bridging Loan Assistance: Get bespoke advice and support from our specialist advisors who understand the urgency of bridging finance and guide you through each step of the process with precision.
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Get Answers to the Top 10 Bridging Loan Questions
The bridging loan process typically involves the following steps:
- Initial Inquiry: Discuss your requirements with a broker or lender to understand your options.
- Application: Submit necessary details, including loan amount, purpose, and property information.
- Valuation: A valuation of the property (or properties) being used as security is arranged.
- Underwriting: The lender assesses your application, including your exit strategy, credit history, and valuation report.
- Legal Work: Solicitors handle the legal documentation, including property checks and agreements.
- Fund Release: Once all checks are complete, funds are transferred to your account or directly to the seller if it’s a property purchase.
Bridging loans are typically arranged within a few weeks, but the timeline can vary based on factors such as the lender, your specific circumstances, and how quickly you provide the necessary information. The speed of the process also hinges on the prompt initiation of legal and valuation procedures—delays often arise when these steps are not prioritized. Designed for fast turnaround, bridging loans are well-suited for time-sensitive opportunities.
Tip: To ensure a smooth and swift process, instruct legal and valuation teams as early as possible.
To apply for a bridging loan, you’ll typically need:
- Proof of identity (e.g., passport, driving license).
- Proof of address (e.g., utility bill, bank statement).
- Details of the property being used as security.
- Evidence of income (for some lenders).
- A clear exit strategy (e.g., proof of pending property sale or long-term refinance plan).
Having these documents ready can significantly speed up the process.
An exit strategy is your plan for repaying the bridging loan when it matures. It’s a crucial part of the application process, as lenders rely on it to assess risk. Common exit strategies include:
- Selling the property.
- Refinancing to a long-term mortgage.
- Using cash from a business or investment.
Without a viable exit strategy, it may be challenging to secure a bridging loan.
Yes, most lenders require a property valuation to assess its market value and suitability as security for the loan. The valuation helps establish:
- The Loan-to-Value (LTV) ratio.
- The condition and marketability of the property.
Some lenders use Automated Valuation Models (AVMs), which can significantly speed up the process by providing instant or near-instant valuations. However, for more complex cases or unique properties, a full physical valuation may still be required.
Tip: Arranging the valuation promptly or working with lenders offering AVMs can help expedite the loan process.
Yes, bridging loans are flexible and can be secured against various types of properties, including:
- Residential properties (for personal or rental use).
- Commercial properties (offices, shops, warehouses).
- Land (with or without planning permission).
- Mixed-use properties.
- Properties in need of refurbishment or development.
The type of property may affect the terms and interest rates offered by lenders.
To avoid delays and ensure a seamless process:
- Be prepared: Have all necessary documents ready, including proof of identity, address, and your exit strategy.
- Act quickly: Instruct solicitors and arrange a valuation immediately after applying.
- Communicate clearly: Respond promptly to lender or broker requests for additional information.
- Work with experts: Choose a broker, solicitor, and lender experienced in bridging loans.
During underwriting, the lender evaluates:
- The viability of your exit strategy.
- The property’s value and condition (based on the valuation report).
- Your creditworthiness (in some cases).
- The overall risk of the loan. The lender may request additional documentation or clarification before making a final decision.
Funds are typically released once all conditions are met, including:
- Successful valuation.
- Completion of legal work.
- Approval of the loan agreement. The funds are either transferred directly to your account or sent to a third party, such as a property seller, if it’s for a purchase.
Failing to execute your planned exit strategy, such as selling the property or refinancing, can lead to serious consequences:
- Penalty Charges: Many lenders impose additional fees or higher interest rates if the loan term is exceeded.
- Re-Bridging: You may need to secure a new bridging loan (known as a re-bridge), which can be costly and is often viewed unfavorably by many bridging lenders.
- Legal Action: If the loan remains unpaid, lenders may take legal action to recover their funds, potentially resulting in the forced sale of the secured property.
Tip: If you believe you won’t be able to exit the bridging loan on time, start discussions with your current lender well in advance. Keeping them informed can often lead to an amicable solution, such as a possible extension.
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