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Bridging Loan Criteria
There are hundreds of lenders across the UK with varying bridging loan criteria – some facilitate specialist loans, while others finance bridge loans for low-risk borrowers.
Whatever your need for a bridge loan, there's likely a lender out there who can facilitate it for you – the question is, which lender do you choose? How do you compare rates? And what criteria must be met to be successful?
Here, we guide you through bridging loan eligibility, the standard criteria set by lenders, how you can bend some of the rules, and what you should do before applying.
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What are the criteria for a bridging loan?
What is most important for bridging loan criteria?
Do bridging loans check credit scores?
Do I need proof of income for a bridging loan?
How easy is it to apply for a bridging loan?
How to be eligible for a bridge loan?
Need help applying for a bridge loan?
What are the criteria for a bridging loan?
The main criteria for a bridging loan are:
- Having an exit strategy
- Having security for the loan
The specifics will also depend on whether you're looking for a regulated or non-regulated bridging loan:
Non regulated bridging loan criteria
| Terms | |
| Type of bridging finance | Unregulated |
| Max Loan To Value | 80% LTV Residential & 70% Commercial |
| UK Areas covered | England, Wales, Scotland & Northern Ireland |
| Europe | From £1m - Germany, Spain, Netherlands, Switzerland, Austria, Monaco |
|
Loan Term
|
1-24 months |
|
Minimum Loan Size
|
£50,000
|
|
Maximum Loan Size
|
No maximum |
|
Minimum interest
|
0.45% pm |
|
Interest treatment
|
Rolled, Retained or Serviced |
| Borrower residency | UK residents, UK expats, Non UK Nationals (Limited Options For UK Property) |
| Borrower Type | Individual, Sole Trader, LLP, Partnership, Ltd Company |
| Security Types | Residential, commercial & semi commercial property (1st & 2nd Charge) |
| Funding for: | New builds; Refurbishment; Conversions; Grade listed buildings; Mixed schemes, development and development exit finance |
| Planning Permission Needed | Case By Case |
Regulated bridging loan criteria
| Terms | |
| Type of bridging finance | Regulated |
| Max Loan To Value | 75% LTV Residential |
| UK Areas covered | England, Wales & Scotland |
|
Loan Term
|
1-12 months |
|
Minimum Loan Size
|
£50,000
|
|
Maximum Loan Size
|
No maximum |
|
Minimum interest
|
0.45% pm |
|
Interest treatment
|
Rolled, Retained or Serviced |
| Borrower residency | UK residents, UK expats |
| Borrower Type | Individual, Sole Trader, LLP, Partnership, Ltd Company |
| Security Types | Residential (1st & 2nd Charge) |
| Funding for: | New builds; Refurbishment; Conversions; Grade listed buildings; Mixed schemes |
| Planning Permission Needed | Case By Case |
A lender's criteria will be different depending on the circumstances of the loan, its purposes, and a standard set of criteria that the majority of lenders will follow; here is a more detailed overview:
What's the security? – Bridge loans are secured by collateral, referred to as security; this is typically a property against which the loan is set. Securities can be several different assets, not just property, and multiple securities can also be put up depending on the loan. You can secure your loan against the property you're buying as well as your existing property.
Size of the loan – There are no absolute upper limits for bridge loans, but it will depend on the purpose of the loan. For example, property bridging loans start at £50,000 for commercial and residential property – while bridging loans for business purposes will start at £100,000 and have a higher upper limit.
You can generally borrow us much as you can afford to repay through your exit strategy (e.g., selling the property or refinancing).
The loan size may pose a more significant risk to lenders; if it's a larger loan, then a lender's criteria for eligibility will reflect this.
Related: Bridging Loans: How Much Can I Borrow?
Loan term – Bridge loans are short-term loans, usually spanning 12 months for repayment. However, some loan terms can go up to 36 months. If you need longer to repay, your pool of potential lenders may narrow.
Property, type and location – Lenders will evaluate your security to see if it can sufficiently act as collateral and as an exit strategy for the borrower repaying the loan. The location of a property can also impact their decisions, i.e. marketability and how quickly it is likely to sell if that's part of your exit plan.
Equity, or deposit size – the equity amount you have in a property used as security will determine how much a lender is willing to lend. The higher the LTV (Loan-to-Value), or how much money you'll be able to borrow, will determine how much equity, or deposit, is required – typically, lenders require 25% to 40% equity.
Our Head of Bridging, Sam O'Neill, goes into more details on bridging loan criteria in the video below.
Fergus Allen
Head of Bridging
Let us do all the hard work of finding the right bridging lender for your circumstances.
We secure bridging finance for applications of all types, and we negotiate competitive lending to meet your needs and timescale.
Related: How to Get a Bridging Loan in Scotland
What's the most important criteria for bridging loan lenders?
The most important things a lender will be looking for are the strength and security of your property; this will be the means of repayment and your exit strategy for the loan.
While a mortgage is paid over 20-30 years, bridge loans are paid over a much shorter term.
So lenders will want to see a solid exit plan and how you intend to repay the loan at the end of its term. As most bridge loans are secured through a property, the most common exit strategy is selling or refinancing the property, or selling your existing property if you're bridging the gap before you've sold it.
These are the crucial aspects of a lender's criteria and will be most important to meet when it comes to applying and your eligibility for a specific loan.
Do bridging loan lenders check credit scores?
Bridging loans are much less reliant on your credit score compared to mortgages and other loans.
This is because your repayment is based on your exit strategy rather than committing to a regular repayment.
Your lender may still check your credit score and factor it into their rates, but it's less of a factor, and you can still get a bridging loan with bad credit.
Getting bridging loan advice from an expert who can explain your options, the requirements of specific lenders, and your eligibility for a bridge loan concerning your credit history can be particularly valuable.
Do I need proof of income for a bridging loan?
As with your credit score, your income is less of a factor when applying for a bridging loan due to the method of repayment. You don't need to keep up with monthly payments, so having an income is less important.
However, lenders may require some form of proof of income, and it can vary on what sort of documentation is required, but here are the common types of income proof:
- · Payslips
- · Bank statements
- · Tax returns
- · Rental or investment income
Other sources of income can be used as proof, depending on if the lender is willing to accept them. Income from self-employment, for instance, may require additional evidence to satisfy a lender's criteria for proof of income fully.
How easy is it to apply for a bridging loan?
The process of applying for a bridge loan is not unlike any other type of loan or financial transaction. However, it can only become more manageable with proper guidance or expertise.
It is essential to understand your financial circumstances fully, what the purposes are for a bridging loan, and why you may benefit from this type of loan.
Different bridging lenders specialise in different areas of bridging finance, so a bridging adviser can help connect you to the right one for your needs.
It is a good idea to research and compare the many different offerings from lenders to find favourable rates and precisely what you're looking for. However, it is not advisable to approach lenders directly as most will only work through bridge loan brokers.
For this reason, it is common to seek the help of a broker before you set out to apply. They can help you through all the steps of an application with clarity and understanding.
With a bridge loan broker, the overall process can be relatively quick and straightforward - finance is can be organised within a week in some cases, depending on the complexity of the loan.
Brokers can also help with the legal process, obtaining a solicitor or getting dual representation from the lender's solicitor to speed up the legal underwriting.
How can you be eligible for a bridging loan?
In addition to a lender's criteria, a couple of eligibility requirements must be met before a borrower is considered. You must be 18 or older and have a registered UK address. You are still eligible for a bridging loan if you reside outside the UK.
Moreover, bridge loans are available to anyone, this includes:
- · Private individuals
- · Partnerships
- · Limited companies and businesses
How does bridging work? Watch our video for an example of the process:
Need help applying for a bridge loan?
Here at Clifton Private Finance, we can help guide you through the application process, whether you're looking to purchase a property while awaiting a sale or are already experienced with this type of financing.
When making any significant financial decision, it's always best to seek the help of a bridging loan expert. This will ensure you're getting finance at an affordable and favourable rate.
Call us today on 0117 959 5094 to see how we can help, or book a consultation with us below.
FAQs
How long do bridging loans take?
Typically, bridge loans are very quick to organise – especially with the help of a broker. Depending on the nature of the loan you wish to get, a bridge loan can be set up within 5-7 working days. However, in more complex scenarios, they can take multiple weeks - it depends on the specific case.
How much can a bridging loan cost?
You'll typically pay 1-2% of your loan size as a lender fee, and you'll pay a monthly interest rate.
Because bridge loans are so variable, and a lender's criteria are different from lender to lender, the cost of a bridge loan cannot be summed up in an average. There are additional fees, loan size and interest payments on top. For more information, you can look at our guide on the cost of a bridging loan.
Lastly, our bridge loan calculator can be a great way of determining roughly what you can expect to pay.
How much interest is paid monthly on a bridge loan?
Bridge loans are unlike a mortgage because you do not pay interest monthly. Depending on the lender, you will have more options for paying interest – whether retained or rolled-up interest to be paid at the end of the term in a lump sum.
Read our full guide to bridging loan interest and how it works.
Which banks do bridging loans?
Most UK banks no longer offer bridge loans, at least not in the same capacity as they once did. Only bridge loan lenders offer bridge loans; the best way to compare the bridging loan market is to use a broker.
