A bridging loan is a short-term way to access funds quickly while you wait for longer-term finance to be arranged. However, lenders usually have specific eligibility requirements that you’ll need to meet.
Approval is based on factors such as your financial situation, the value of your collateral (such as property) and your plan to repay the loan. If you meet these criteria, you may be approved for bridging finance.
Here we’ll share the common reasons people apply for a bridging loan and what lenders look for when assessing applications.
What can you use a bridging loan for?
Bridging loans work by ‘bridging the gap’ while you wait for other funds to become available. They can be used for almost any high value purpose.
For example, you might use this loan if you are buying a new home before selling your current one, investing in a property at auction or paying for a refurbishment. This type of loan can help in so many situations, provided it’s the right fit for your circumstances.
The key requirement is that you have a clear plan to repay the loan quickly, such as selling a property, refinancing or pursuing another reliable exit strategy.
Below are some common uses of bridging loans.
Can you get a bridging loan to buy a house?
A bridging loan can help you to buy a house, especially if you need to move quickly. Lenders will typically consider the value of the property you want to purchase, your repayment plan and your overall financial situation.
Bridging finance is particularly useful when:
- You’ve found your dream home but haven’t sold your current house yet. A bridging loan can provide the temporary funds to complete the purchase without rushing a sale.
- You need to act quickly in a competitive market where timing is crucial.
At Ascot Mortgages, we can guide you in deciding whether bridging finance is the right solution or if another type of finance better suits your needs.
Can you use a bridging loan to buy property at auction?
Yes, bridging loans are a popular choice for buying property at auction.
When you win a property at auction, you typically need to pay a deposit immediately (often 10%) and complete the purchase within a tight deadline. Usually, this is just 28 days. Standard mortgages can take much longer to arrange, making them unsuitable for most auction purchases.
Bridging finance can enable you to act quickly, meet the auction terms and secure the property. Many borrowers use the sale of their current property to repay the loan, helping to avoid a rushed sale at a lower price.
With the right plan and expert guidance, bridging finance can turn time-sensitive auction opportunities into your next successful investment.
Can you use a bridging loan to finance a renovation?
Bridging loans are commonly used to finance property renovations/refurbishments, especially when the property isn’t eligible for a traditional mortgage in its current state. Whether you’re planning small refurbishments or a big renovation, bridging finance can give you quick access to the funds you need to get started.
They are typically short-term, often ranging from three to 24 months, and can sometimes be structured to convert into a longer-term mortgage once the work is finished.
By offering flexible funding, bridging finance allows developers, investors and landlords to take on projects that traditional lenders may consider too risky or complex.
It’s important to note that bridging loans usually have higher interest rates and fees than standard mortgages. Lenders will also carefully assess factors such as the property’s condition, your planned exit strategy, loan-to-value ratio and your creditworthiness before approving the loan.
Can you get a bridging loan to buy commercial property?
Yes, bridging loans can be used to purchase both commercial and residential property. This can be helpful if you want to buy offices, retail units, warehouses or mixed-use buildings, especially when you need to move quickly or the property needs refurbishment before it can be used or let.
Bridging finance gives you the flexibility to secure commercial property fast, carry out any necessary work and then repay the loan by selling the property, refinancing with a commercial mortgage or using another exit strategy.
Can you get a bridging loan to fund a start-up?
Yes, they can fund start-ups if you have suitable security and a reliable exit strategy. This is less common than property uses, and we recommend seeking professional advice to ensure it’s the right fit for your business plans.
Bridging loans can be a flexible way to secure the funds you need quickly for high-value needs. The most important factor is having a clear and viable plan to repay the loan.
If you’re considering bridging finance, at Ascot Mortgages we offer a bespoke service with a free, no-obligation consultation and a same-day response to your application. Our experienced team can help you quickly and secure the most competitive rates. Contact us today.
