Frequently asked bridging loan questions

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There are all kinds of questions we get asked about bridging loans, but some of the most common are listed below:

What can I use a bridging loan for?

A bridging loan can be used to raise short-term capital for a number of uses. Provided you have a plan for when and how you can repay the loan, plus have security, there is, in theory, no limit to what the loan can be used for.

Most bridging loans are used for property related deals such as breaking housing chains, buying property at auction, refurbishing property and building new properties. Businesses can use bridging loans to raise capital for temporary low cash flow, to purchase stock or to buy equipment.

How much can I borrow?

Most lenders will not provide bridging loans for under £25,000. Commercial bridging loans can be for £5m to £100m, though occasionally bridging lenders lend much more than £100m.

The maximum loan amount is dependent on the value of the security, which is usually property. You can get a loan equal to the percentage of the value of the property. This is known as the loan to value or LTV and can be equal to 65% to 80% of the property’s value.

How long does a bridging loan take?

The initial offer of a bridging loan can take a day or less. It is possible for the money to be available in 48 hours, but this is unusual. You need to supply documents about your financial position and these have to be checked. A valuer will normally write a valuation report on the property, and there will be legal work that needs completing.

This whole process can take weeks, but if the loan is time sensitive, the lenders and the solicitors doing the legal work can make your loan application a priority in order to have the loan funds available within a few days.

What can be used as security for the loan?

Most bridging loans are secured by property. It doesn’t matter if the property is not in a good condition, as long as its value can cover the loan amount.

Lenders will consider business equity and other assets from commercial borrowers.

Who can apply for a bridging loan?

Individuals and companies can apply for bridging loans. Applications can also be made by partnerships, sole traders, self-employed people and charities.

What other fees are there?

As well as interest payments, you will normally have to pay an arrangement fee. This is usually only paid once you have received and accepted a loan offer. You may also have to pay for a valuation report and there will be legal fees.

What is the difference between a closed and open bridging loan?

A closed bridging loan has a fixed repayment date. An open bridging loan has no fixed payment date, though repayment is due before the end of the loan period. There are normally no exit fees for early repayment.

Where do I find out more?

For more answers to your bridging loan questions, contact Ascot Mortgages – the bridging loan experts.

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