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How to find the best bridging loans
You've probably noticed that there aren't many 'comparison sites' for bridging loans - the ones that put multiple products into a table, allowing you to easily weigh the pros and cons.
Unfortunately, bridging loans are somewhat too bespoke for that kind of side-by-side comparison that works for other loans, like mortgages.
The rate you get varies greatly depending on your situation, and many lenders don't accept applications from clients directly anyway, so you have to go through a broker.
So, if you can't fully rely on a bridging loan comparison site...
How do you find the best bridging loan for you?
You have two options to find the best bridging loans:
Bridging loan brokers are experts in the field, and they can quickly determine the right lenders to approach for your specific situation.
This means that although you'll pay a fee for their service, you're much more likely to find the best bridging loan for you at a competitive rate.
And the entire process will probably be a lot quicker and smoother.
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The general consensus is that sourcing a bridging loan yourself should only be done if you're experienced with the products and have used them before.
It's not to say you can't get one directly from a lender - especially if you know what you're doing - but unless you know the ins and outs of the industry, it's hard to say with confidence that you'll reliably find the best bridging loan for you.
Looking for a reputable, award-winning, friendly and professional broker service? Take a look at our bridging loan services page to find out what we offer and why you should use us.
Written by: Sam O'Neill & Sam Hodgson
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How to compare the best bridge loans
Can you go to lenders directly?
How do bridge loan brokers help?
How do I find the best bridge loan broker?
How to compare the best bridge loans
Firstly, you need to determine what kind of bridging loan you need. If you need help figuring out what's best for your situation, a broker can support you.
Here are some bridging loan rates we've recently secured for our clients (remember, interest rates and how much you can borrow depends on your situation):
Residential
Buying Before Selling?
Rates from:
0.50% pm
Downsizing/Upsizing
Releasing Funds From Your Home
Short-Term Lease Finance
Auction Purchase
As at 3rd January 2024
Development & Refurb
Fast Finance
Rates from:
0.50% pm
Light & Heavy Refurb
Finance For Unmortgageable Properties
Land Purchase with planning
As at 3rd January 2024
Residential
Large Bridging Loans
Rates from:
0.50% pm
Up to 80% LTV
Minimum Loan £500k
Minimum net income £100k
As at 3rd January 2024
Contact Us
Thank You for your interest - please complete the form below and a member of our team will be in contact.
- What type of loan do you need? – It is a good idea to determine early precisely what type of loan you'll need for your purposes. Some lenders specialise in different types of loans – for example, if you're looking to finance the purchase of a new home, you will likely want to secure a regulated loan for residential property.
- Determine your borrowing needs – Before comparing bridge loans, it's important to determine how much money you need to borrow and how long you need the loan.
- How soon do you need the money? – In some cases, a bridging loan can be arranged within a few days after application. As a result, you can proceed with a property purchase or start a development project as soon as possible. It could, however, take you longer without the assistance of an experienced bridge loan broker. When comparing, it is essential to have a time frame for when you need funds and a solid action plan.
Case Study - Read our bridging loan example below, where we helped a client secure their new country home, and added the extra convenience of funding their classic car purchases:
- Shop around – Compare rates and terms from several different lenders, including banks, private lenders and online lenders. Be sure to also check for any fees associated with the loan. Remember, some private lenders can only be accessed via a broker!
- Check for flexibility – Depending on your needs; bridge loans often allow "rolled up" interest – meaning interest on the loan outstanding can be paid off early. Additionally, there are usually no early repayment fees with bridge loans. When comparing, you will want to carefully read the terms and specifics to ensure they suit your situation.
- Look for experience: Look for a lender with expertise in providing bridge loans of the type you need, as they will be better equipped to understand your unique needs and structure the loan accordingly.
- Talk to a mortgage broker - A mortgage broker can help you compare bridge loan options and assist you in finding the best loan for your specific needs.
How much does a bridging loan cost?
The cost of a bridge loan can vary depending on a number of factors, including the loan amount, the lender, and the borrower's creditworthiness.
Generally, a bridge loan will come with a higher interest rate when compared to traditional mortgages – this is due to a higher risk from the lenders' perspective.
The annual interest rate on a bridge loan can range from around 8% to 12% or even higher. But remember, rates are typically displayed monthly with bridging loans instead of annually like other loans.
Additionally, many bridge loan lenders charge origination fees ranging from 1% to 4% of the loan amount. Other costs may include appraisal fees, closing costs, and prepayment penalties.
Related: Try our bridging loan calculator for an instant quote
Most importantly, there is no standard cost for a bridge loan as its overall cost is affected by several variables and is dependent on the length of the loan term – the shorter the term, the higher the interest rate will be.
With this information, you can begin to compare multiple bridge loan offers closely and find better terms and rates.
Using a bridge loan calculator will give you a good starting point on what you can expect to pay. Again, a specialist broker can be beneficial as any initial costing you calculate may only partially reflect the best bridging loan we could secure for you. You can try our bridge loan calculator here.
Do lenders' rates vary when it comes to bridging loans?
Interest rates on bridge loans vary among lenders. Several factors can affect the interest rate on a bridge loan, including the lender's underwriting standards, the loan-to-value ratio, and the borrower's creditworthiness.
Additionally, lenders will consider several key points when determining the risk factor:
- Creditworthiness – Lenders will look at the borrower's credit score and credit history to assess their ability to repay the loan.
- Collateral – Lenders will evaluate the value and condition of the property or deposit being used as collateral for the loan.
- Exit strategy – Lenders will want to know how the borrower plans to repay the loan – this could come in the form of selling the property or refinancing it with a traditional mortgage.
- Loan-to-value ratio – This ratio compares the loan amount to the property's value. A higher LTV (loan-to-value) ratio may indicate a higher-risk loan.
- Other factors – some other factors that lenders can consider are the property location, the market condition, the purpose of the loan, the experience of the borrower and the type of property.
Some lenders may offer a fixed rate for the entire term of the loan, while others may provide adjustable rates. The terms and conditions of the loan can also vary from lender to lender – this is why comparing bridge loans can become an involved process because of the many options.
Case Study - watch our video below explaining how our client used a bridging loan to fund an auction purchase when a standard mortgage wasn't quick enough:
Do I need a bridging loan broker?
By applying for finance through a broker, you gain access to more options and can save time.
The cost of an additional broker fee can be well worth the advantages of preventing blunders or oversights, especially for the inexperienced.
Brokers can find suitable lenders based on your needs and help you avoid the obstacles associated with directly contacting lenders.
Can I go directly to lenders instead?
Lenders can be approached, but it's not recommended to do so directly if you're inexperienced or haven't worked with one before. People often don't recognise which lender best suits their circumstances since lenders have a wide variety of bespoke products and specialise in different areas.
If you approach directly, you will lose access to a broker's network - you will not benefit from working with specialists who have established relationships with lenders. Moreover, bridge lenders prefer to organise finance through brokers rather than individuals.
Ultimately, it will come down to what type of loan you need, if it's a bespoke product, or if you have a working relationship with any given lender. Regardless, going through a broker for a bridge loan is typically the most efficient way to secure finance.
How can a bridging loan broker help?
A competitive market demands swift action when purchasing or developing property. Your plans may be hindered or delayed if you cannot find a suitable lender and loan. Here is where a bridging loan broker can help.
However, whether or not you need a bridge loan broker will depend on your individual situation and needs. Here are some factors to consider:
- Experience and expertise – A bridge loan broker has experience in the field and can help you understand each option's pros and cons. They can also help you navigate the application process and ensure you have the documentation to apply for a loan.
- Time-saving – A broker can save you time by shopping around for the best loan rates and terms on your behalf. This can be especially useful if you are in a time crunch to secure financing for a property purchase.
- Access to multiple lenders – A broker will typically have access to a wide range of lenders, increasing your chances of finding a loan that meets your needs.
- Tailored solutions – A broker can help you find a loan tailored to your specific needs and financial situation.
- Help understand the terms and fine print – A broker can explain the terms and conditions of the loan in layman's terms and help you understand the fine print.
Ultimately, brokers will work through your interests to secure you the best deal. They create a competitive environment for lenders, which can lower rates, making them more favourable to borrowers.
Additionally, brokers can help clients put their best foot forward regarding applications, as an unsuccessful application can sometimes negatively impact credit scores.
Are there any disadvantages to using a broker?
Depending on your circumstances, you may find that going through a broker gives you less control over the loan process – however, this would only apply to those experienced in bridging finance or those who have worked with lenders directly before and are seasoned property developers – rather than those looking to "bridge a gap" to purchase their next residential home, for example.
Most people will find that going through a broker simplifies the process and eases the stress of comparing the many choices of bridge loans – which to most, is well worth the fee!
Need a bridging loan? Get in touch with our specialists.
Short-term financing can help you in time-sensitive situations - bridge loans offer speed and flexibility. With our help, you can find the best bridging loan deal for your situation.
At Clifton Private Finance, our bridge loan experts will help you determine what loan you need and find specialist lenders that might otherwise be unavailable.
Besides guiding you through the entire process, we can negotiate the best rates and tailor a bespoke solution that best suits your circumstances.
We are available to answer any questions, so don't hesitate to contact us.
Call us at Clifton Private Finance to find out what we can do for you:
0203 900 4322
FAQs
Yes, a valuation is typically required for a bridging loan in the UK. Since bridging loans are often secured against a property or other valuable assets, lenders will want to assess the market value of the property being used as security. This helps the lender determine how much deposit they want you to provide based on the value and condition of the property. You can borrow up to £25m with bridging finance, but it’s typically capped at about 80% of the value of the property you’re using as security. It's important to note that different lenders have varying policies and criteria regarding the maximum loan amounts they offer for bridging finance. Some lenders have a maximum limit of over £1 million, while others may specialize in smaller loan amounts. Additionally, the terms and conditions of the loan, including interest rates and fees, should also be taken into consideration when determining the overall affordability of the bridging loan. Yes, you typically need a 20-40% deposit for a bridging loan. It can be possible to get a bridging loan without a deposit (a 100% bridging loan), but you’ll need other assets in the background to secure the loan against, and more stringent criteria and higher costs could apply. Yes, it is possible to get a 100% bridging loan (also known as a 100% LTV bridging loan), but it is rare. This means that you won’t need to put down a deposit and can borrow the full value of your property. However, the criteria for these loans can be hard to meet, and you’ll need to provide additional assets as security for your loan. Interest rates and fees can also be higher to compensate. While using bridging finance doesn’t technically make you a cash-buyer, it can allow you to act like one. Mortgages take months to process, often leading to an ‘onward chain’ where all parties involved need to wait for funds to be transferred. Bridging finance can usually be accessed a lot quicker than mortgages so you can bypass the onward chain, giving you an advantage over other buyers and being attractive to sellers. Bridging loans typically have a term of 12 months, but some lenders are willing to stretch their terms to 18 months, or even 2 –3 years depending on the case. Terms longer than 2 years will usually only be considered for specific cases. Yes, you can use a bridging loan to pay Stamp Duty. This amount could be covered by a bridging loan, providing you have a way to repay the additional borrowing amount to your lender. Yes, bridging loans are safe when they’re used in the right circumstances with a solid repayment strategy. However, we recommend speaking to a qualified advisor, like our brokers at Clifton Private Finance, before you take out a product. The main factors to consider with bridging finance are that the full loan amount will usually need to be repaid within a year, and like a mortgage, it is secured against a property as collateral. This means that in the case that you aren’t able to repay your bridging loan, your property would be at risk of repossession. But with a watertight exit strategy, bridging finance can be an efficient way to secure property quickly. Bridging loans are designed to be short-term so there’s no maximum age limit when applying for a bridging loan. This does depend on the lender, as some bridging lenders do have an upper age limit, but there are lenders on the market who offer bridging loans for borrowers aged 70 and over. Bridging loan interest rates usually range between 0.45% - 2% per month, depending on the case and the market rate. Unlike mortgage interest rates, bridging loan interest is calculated monthly instead of yearly. This is because bridging loans are short-term and, in many cases, repaid within a year. Bridging loans can be arranged without early repayment penalties, so interest is calculated monthly to ensure you only pay interest on the months you have the loan for. Unfortunately, mainstream banks in the UK don’t offer bridging loans. This means that if you’re looking for a bridging loan, you won’t be able to get one using a lender you’d find on the high street. There are a variety of specialist lenders that offer bridging loans, but because these lenders are smaller and more niche, you may need a bridging broker to access them. Banks typically charge two main fees when taking out a bridging loan – arrangement fees and interest. But there are other costs to consider such as valuation fees, broker fees and administration fees. Costs can vary from lender to lender, and will also depend on what your bridging loan is for (e.g., residential or commercial purposes.) Arrangement fees are what the lender charges you to take out the loan and can range between 1.5 - 3% of your overall loan. Bridging loan interest, on the other hand, is calculated monthly. This can catch borrowers out who may be expecting an Annual Percentage Rate (APR) like with a mortgage. Yes, you can convert a bridging loan to a mortgage through refinancing, and it is common among borrowers who use bridging finance to buy residential properties. However, whether or not you’ll be able to refinance to a mortgage is dependent on your financial circumstances, the lender, and the property you’re planning to buy. It’s important to be sure that refinancing is a viable repayment option before you take out a bridging loan on a residential property. Yes, bridging loans are typically more expensive than mortgages. Bridging loan interest rates can be much higher than a mortgage, and are calculated and displayed as monthly rates instead of the usual annual percentage rate (APR) that you’ll see on a mortgage. However, bridging loans are a short-term solution, and you’ll only pay interest on the months you’ve borrowed money for – and you can repay early without any charges (for most loans). There are many circumstances where bridging loans are an affordable option and a means to an end - for borrowers that need to finance a property purchase quickly, it may be the only option available. The two most common ways to pay a bridging loan are to sell a property or refinance to a mortgage. You may also need to ‘service’ the loan through the term, which means paying the interest monthly. However, you can opt to ‘roll up’ your bridging interest to be repaid at the end along with the capital. There are also other ways to repay a bridging loan, such as selling a business or even using money from an inheritance. The method in which you pay your bridging loan can be flexible, just as long as it is clear in your application that you have a surefire way to repay your loan when the terms are up. In most cases, a bridging loan will require a minimum deposit of 25%. However, the minimum can vary depending on the lender and the specific circumstances of the loan itself. Generally, bridging loans are secured against a property or other valuable assets, and the deposit required is often expressed as a percentage of the property's value, known as the loan-to-value ratio. In some cases, 0% deposit bridging loans are an option, but only if you have other property or assets in the background to provide additional security. No, typically, you’ll repay a bridging loan in one chunk at the end of the loan term. Bridging loans are a form of short-term finance and will usually need to be repaid within 12 months, but there can be room for flexibility. In some cases, borrowers may be required to make monthly interest payments. This means that each month, you would pay the interest accrued on the loan amount while the principal amount remains outstanding until the end of the loan term. But usually, the interest is "rolled up" or added to the loan balance and paid with the rest of the loan at the end of the term. This option can help protect your cashflow so you can spend it on moving costs or refurbishments, for example. Bridging loans can be arranged in as little as 7 working days. However, it depends on the complexity of the bridge loan and your specific circumstances. It may also be more expensive for you to rush an urgent application through – but not impossible. Bridging loans are a popular option for borrowers who are under time constraints, such as buying a property at auction or breaking a chain. The key factors lenders tend to consider are: Security - Bridging finance is usually secured against property or other valuable assets. Lenders will assess the value and marketability of your security. Exit Strategy - Lenders will want to understand how you plan to repay your bridging loan. In most cases, this is selling your old property, selling the new property (flipping), or refinancing with a long-term mortgage. Loan-to-Value (LTV) Ratio - Lenders consider the loan amount compared to the value of the property being used as security as a percentage. The LTV ratio can vary, but most lenders will have a maximum of 60-80% LTV. Remember, the criteria for obtaining bridging finance in the UK can vary depending on the lender and your circumstances.
Do you need a valuation for a bridging loan?
How much can you borrow with bridging finance?
Do you need a deposit for a bridging loan?
Can I get 100% bridging finance?
Does a bridging loan make you a cash buyer?
What is the longest bridging loan term?
Can I use a bridging loan to pay stamp duty?
Are bridging loans safe?
Can an 80 year old get a bridging loan?
What is the monthly interest rate on a bridging loan?
Do banks still do bridging loans?
How much do banks charge for bridging loans?
Can you turn a bridging loan into a mortgage?
Is a bridging loan more expensive than a mortgage?
How are bridging loans paid?
What is the minimum deposit for a bridging loan?
Do you pay monthly payments on a bridging loan?
How long does it take for a bridging loan to come through?
What is the criteria for bridging finance?
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