What Is A Bridging Loan & Who Would Qualify

Bridging Loans could be described as relatively short term “interest only” loans, usually setup for a maximum term of 12 months in length and which normally do not require monthly payments, do not have exit penalties if repaid within the agreed term and are often used when other more traditional forms of finance such as mortgages are not available to the applicant or for whatever reason where traditional finance methods cannot be used.

On most bridging loans, interest is normally only liable for the amount of time that the loan is used i.e. if a loan is arranged for 12 months but repaid after 3 months and 6 days, interest is usually charged and repaid on the loan for the 3 month and 6 day period and not for the full 12 months.

The reason that applicants are refused traditional finance or where traditional finance is not suitable are varied and the most common bridging loan examples would be:

  • because the applicant is older than the new acceptable age limits for mortgages
  • the applicant may be asset rich but cash poor i.e. not enough income proof to pass the required affordability calculations needed to obtain a mortgage
  • the applicant may have poor credit which is not acceptable for mortgage finance
  • the property may be classed as not standard security for a mortgage i.e. the property could be without a kitchen or bathroom or generally in need of much modernisation, making it not habitable
  • the seller may only accept offers from buyers who are chain free such as cash buyers or buyers with bridging finance
  • the finance could be required for a development opportunity
  • it may be that the finance is needed for additional borrowing such as a 2nd charge
  • the funds may be needed urgently and/or for a specific requirement which are not allowable in the world of mortgage finance such as borrowing for an urgent business need
  • the money may be just for a flexible or short term requirement
  • the borrower wants minimal fuss
  • the borrower wants to purchase a new property but the deposit is not yet liquid and tied up in another property yet to be sold

Who would qualify for bridging finance loans?

  • Clients who can or cannot prove income
  • Clients with an excellent or impaired credit rating
  • Clients who are employed, self-employed or not employed
  • Companies or individuals
  • Anyone with equity in their property or an available cash deposit
Last Updated: Mar 21, 2018 @ 1:48 pm

UK Property Finance is Authorised by The Financial Conduct Authority (FCA)

Association of Bridging Professionals
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