Bridging Loans and Finance

Each lender has its own set of lending criteria a borrower must meet to be considered for a loan. Some lenders focus on the lower value and lower risk type lending while there are others that specialise in niche areas of the market. There are two main elements to consider before applying:

• Security – The lender will require a form of security. This can be one or more properties.
• Exit/repayment strategy – A well-planned exit or repayment strategy is essential. In most cases, this involves either selling the property or refinancing with a traditional mortgage.

With the right help, the process of applying for a bridging loan can be straightforward. It typically involves the steps outlined below:

Step 1: Consult a Bridging Finance Expert

Before applying for a bridging loan, it’s a good idea to consult an expert. Here at Ascot Mortgages, we can give you advice that’s tailored to your unique circumstances. This can be done by phone or in person.

During this initial consultation, we’ll discuss:

• what you need the bridging loan for
• how much you want to borrow 
• how you plan to repay the loan (your exit strategy).

We will assess your situation and recommend suitable lenders based on your circumstances and goals. 

Step 2: Get an Agreement in Principle

After the bridging loan broker has a clear understanding of what you want the bridging loan for, and is confident that you have a realistic plan to repay the loan, the advisor will approach lenders they believe are likely to approve your loan application.

If successful, your Agreement in Principle should be accepted within 24 hours or less. The initial offer will be conditional depending on a valuation of the property used as security and the legal work that needs to be done. The lender will also look into your financial situation. The borrower will need to provide a number of documents that need to be checked before a formal offer is provided by the lender.

Step 3: Submit your Formal Application and Supporting Documents

Next, you’ll need to complete a formal application form and provide supporting documents, such as:

• Proof of identity
• Proof of income
• Bank statements
• Details of property being used as security
• Your exit strategy
• Financial accounts (for businesses)

Step 3: The property valuation

The property used as security for the loan must be valued to make sure that it will cover the loan. This is normally conducted by a professional valuer, who will write a report about the condition of the property and its value. If the property has had a recent survey, the lender may accept this instead of appointing a valuer. The borrower normally pays a fee for the valuation.

If you are an individual applicant, the property used as security should be your main residence. Landlords can use other rented property they own as security, and a business can use its work premises as security if it owns the building. Some lenders will consider other company assets as security, such as stock, the value of invoices due to be paid, or equity in the company.

Step 4: The Formal Offer and the Start of the Legal Work

After all the documents have been checked and the valuation completed, a formal offer letter will be sent. The offer letter usually comes with a legal pack sent to your solicitor to action. Most lenders will allow you to appoint your own solicitor, but some may have a specified panel of solicitors to choose from. If you choose your own solicitor, make sure it is one who understands bridging loans and the short timelines required for the legal work.

Step 5: Loan Complete and Funds Release

After the formal letter has been received and all legal work has been completed, the loan money will be released. This is usually transferred to the borrower’s solicitor, who will transfer the money to complete the property purchase. If a company is using the loan for short-term cash purposes, it will be put into the company’s bank account.