The amount you can borrow is dependent on the value and type of security property being used. This question is very difficult to answer properly without reviewing the case fully however based on 1 property as security, in theory, the maximum loan size available on a regulated bridging loan (arranged on a property where you or an immediate member of your family live, have lived or intend to live in over 40% of the useable floor area) is 70% of the security properties valuation and on an unregulated bridging loan (an investment property where you or a member of your immediate family has never lived, does not live and does not intend to live in over 40% of the useable floor area) is 75/80% of the security properties value.
The above figures are based on the gross loan (including all fees and interest). The net loan (without any fees or interest) would be between 5 & 10% less than the figures stated above.
Additionally, it is possible to borrow a larger amount of say 100% or more of the properties valuation via using additional security. For instance, if you wanted to purchase a property for £500,000 and required the full £500,000 or more you could use other properties as additional security properties to make the deal more appealing and less risky for the lender i.e. if you had another property valued at £500,000 which was unencumbered (without a mortgage) or even if it had a small mortgage, the lender could secure across this property also to allow the full loan amount required.
|New property value:||£500,000|
|Additional security value:||£600,000|
|Total security values (£600,000 + £500,000):||£1,100,000|
|Loans: £100,000 (outstanding mortgage) + £550,000 (loan required):||£650,000|
£650,000 is approximate 59% of the £1.1million value of the securities (£650,000 / £1,100,000 x 100) making the loan acceptable to the lender as the maximum loan allowable in this situation would be 70% LTV of the value of the securities, including all fees and added interest.
As interest payments are not required on a monthly basis, the loan increases in size throughout the term, until repaid. Depending on the scenario, by the end of the agreed term, fees and interest can add a further 5 – 10 % to the size of the original loan.
It may also be possible to use more than 2 properties as security to borrow the funds required and/or to qualify for better rates by reducing the LTV.
Lenders will determine the maximum LTV available by adding the net loan plus arrangement fees plus interest generated should the loan run for the full term arranged.