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Bridging Loan For A Self Build

Bridging Loan For A Self Build

Building a property from scratch and having the opportunity to customise everything can be an attractive prospect. For those looking to get a self build underway, it is vital to secure adequate finance to see the project through to completion without delay.

Bridging loans may be a viable option for self build projects as they can provide the funding required within a short period of time.

  • Market leading bridging loans from £50,000 to £25m
  • Rates from 0.55% pm
  • Lower rates for £1 million+ loans
  • Finance within 7 working days is possible depending on your circumstances
  • Terms from 3 months to 3 years
  • LTVs up to 80% (can be more if other assets in the background)
  • Interest roll up options
  • Residential (On a regulated basis)
  • Bridging finance for business purposes (purchasing land or new premises, deposit for new purchase)
  • Alternative assets considered e.g. pension, investment porfolios, fine art, classic cars
  • Automated valuation option for properties under £1m
  • We provide a friendly, professional service to help you get the money you need at the best available rates

Residential

Buying Before Selling?

Rates from:

0.55% pm

Downsizing/Upsizing

Releasing Funds From Your Home

Short-Term Lease Finance

Auction Purchase

As at 21st May 2024

Development & Refurb

Fast Finance

Rates from:

0.55% pm

Light & Heavy Refurb

Finance For Unmortgageable Properties

Land Purchase with planning

As at 21st May 2024

Residential

Large Bridging Loans

Rates from:

0.55% pm

Up to 80% LTV

Minimum Loan £500k

Minimum net income £100k

As at 21st May 2024

Contact Us

Thank You for your interest - please complete the form below and a member of our team will be in contact.


Through our strong links to high street banks and private lenders, we can deliver enhanced, bespoke or exclusive terms based on your requirements.  
Call us on 0117 959 5904 to discuss your requirements.
 

Can You Get a Bridging Loan for a Self-Build?  

Yes, it's possible to get a bridging loan for a self-build project. Bridging loans are short-term financing options typically used to "bridge" the gap between the purchase of a new property and the sale of an existing one or for other short-term financing needs. 

For self-build projects, where you're constructing a property from scratch, a bridging loan can be used to cover expenses during the construction phase until you secure a mortgage or other long-term funding. These loans usually have more flexible terms than traditional mortgages, and they can be tailored to suit the specific needs of your project. 

When applying for a bridging loan, you'll likely need to provide detailed plans and cost estimates for the construction and information about your financial situation. Lenders will assess the viability of the project and your ability to complete it within the agreed-upon timeframe.  

In This Guide:

Is It Hard To Get a Bridging Loan?


How Much Can I Borrow for a Self-Build?


What Are the Stages of a Self-Build?


Can You Pay Off a Bridging Loan Early?


How Long Does It Take to Complete a Self-Build?


What is the Repayment Period for a Bridging Loan?


How Do I Get Funding for a Self-Build?


FAQs

Is It Hard To Get a Bridging Loan? 

No, the process of securing a bridging loan is relatively simple in comparison to a mortgage. While bridging lenders will assess your financial circumstances and creditworthiness, they will put much less emphasis on it than with a mortgage or personal loan.  

The main obstacle you’ll need to overcome is finding a watertight exit strategy to repay the loan. Because bridging loans are more short-term, they typically aren’t repaid monthly. Your repayment sum, including interest, will be rolled up and repaid at the end of the loan term. 

This means you’ll need a surefire method of repaying this sum within the loan terms. This could be through selling a property or a business or refinancing your bridging loan to a mortgage. Bridging loans are inherently flexible, so there are many means you could use to repay the loan. Bridging lenders will assess the reliability of this exit strategy, and if you are successful, funds will typically be released quite quickly. 

If you have confidence in your exit strategy and you need access to funds exceptionally quickly, it is also possible to fast-track your application for an additional fee.  

Watch our video below - Bridging Loans Explained: Costs, Timescales, Examples, & How To Get One

How Much Can I Borrow for a Self-Build? 

Our bridging loan calculator is a valuable tool that helps simplify the process – it’ll work out an indicative quote and support the initial stage of finding out if bridging finance is the best option for you. 

Bridging loan calculator button for blog post titled 'Are bridging loans a good idea?'

Book Consultation »

What Are the Stages of a Self-Build? 

Building your own home is a complex undertaking that can be made much easier with meticulous planning and a great team.  

Throughout each stage of the self-build process, it's essential to stay organized, communicate effectively with contractors and suppliers, and be prepared to adapt to any challenges or changes that may arise. Working with experienced professionals, such as architects, builders, and project managers, can help ensure a successful outcome for your self-build project. 

Each project can vary, but here are the key stages of a self-build project: 

Set a Budget 

Evaluate your financial resources and determine the scope of your project. In the early processes of any development project, research is key. Allocate funds for buying land, design, construction, and finishing. It’s also common for development projects to go over budget, so make sure to include a 20% overspill in your budget. 

Planning & Pricing Materials 

Planning and costing materials allow you to develop a comprehensive budget for the project. By accurately estimating the costs of materials needed for construction, you can ensure that your budget is realistic and aligned with your financial resources. 

By identifying the types and quantities of materials required for each stage of the project, you can ensure that materials are ordered and delivered in a timely manner, minimizing delays and disruptions to the construction process. 

Finding a Location 

You’re building the home you always dreamed of, and naturally, it’s likely that you have an idea of where you want to build your home in your mind already. Before you begin looking for a plot, it’s important to consider local building regulations, availability of land and your overall budget. Are you building a 3 bedroom in the city, or your own grand design in the countryside? The square footage of land will run up a significantly larger cost in a sought-after location. 

Once you feel confident about what you are looking for, consult with estate agents or a land agent to find some options.  

Obtaining Planning Permission 

Planning permission is crucial in the UK as it ensures that any proposed development or construction project complies with local planning policies, regulations, and sustainability objectives. Obtaining planning permission is necessary to legally proceed with a construction project and avoid potential fines, enforcement actions, or delays. 

In many cases, it's advisable to try to obtain planning permission for land before you buy it. You can get planning permission after you buy a property, which can be an option if there are a lot of other buyers are interested. It’s worth seeking advice from a solicitor if you’re planning on buying development land without planning permission to evaluate the likelihood that you’ll be granted planning permission.  

Securing Funding 

One of the most crucial stages of a home build project. In some cases, once-in-a-lifetime projects like this can be funded with personal savings, but there are financial solutions available for individuals where this isn’t the most suitable option.  

Self-build mortgages and bridging loans (which can be refinanced to a mortgage) are the most common ways to fund a self-build. To get a clear idea of your funding options, it’s worth consulting an experienced finance broker. A specialist broker will have connections with variety of lenders and can find you the most suitable deal.  

Building 

After all of these steps are complete, you can begin your build. This exciting process typically takes around 12 months, although it can take more or less time, depending on your experience. The team you’ve assembled will be a huge asset during this process, and you will hopefully have a unique home that you can enjoy for decades to come.

Property Bridging Loan Case Studies

Read through our 100+ bridging loan case studies, breaking down the details of how bridging loan transactions work in practice:

Bridging Loan with Multiple Drawdowns Secured for 18-Bed HMO Conversion
Bridging Loan with Multiple Drawdowns Secured for 18-Bed HMO Conversion
Area
Kent
Capital Raised
£1.2m
Case Study: Complex Bridging Loan for Spanish Villa in Just 6 Working Days
Complex Bridging Loan for Spanish Villa in Just 6 Working Days
Area
Staffordshire
Capital Raised
£1.48m
Case Study: 24 Month Bridging Loan Secured Against £23m London Home
24 Month Bridging Loan Secured Against £23m London Home
Area
London
Capital Raised
£6.5m
Fast Bridging Loan to Raise Deposit for a Larger Family Home
Fast Bridging Loan to Raise Deposit for a Larger Family Home
Area
London
Capital Raised
£215k
Bridging Loan Guarantor - How It Works
Bridging Loan With A Guarantor To Buy New Bournemouth Home
Area
Bournemouth
Capital Raised
£1m
Case Study: Fast Bridging Loan with Low Credit Score to Buy Before Sale
Fast Bridging Loan with Low Credit Score to Buy Before Sale
Area
North Wales
Capital Raised
£140k

 

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Can You Pay Off a Bridging Loan Early? 

Yes, in most cases, you can pay a bridging loan early. A key advantage of using a bridging loan is that it is relatively flexible and quick to access. 

With flexibility being a main selling point of bridging finance, it’s uncommon for these loans to have early repayment fees. Additionally, bridging loans are repaid in a lump sum, so it makes sense to repay the loan as soon as you have the funds.  

This also means you’ll typically only pay interest on the months you have the loan for, which helps keep costs to a minimum.  

How Long Does It Take to Complete a Self-Build? 

A rough estimate for the duration of a self-build is between 12 - 24 months. By their nature, each self-build is unique. How long your self-build project takes will depend on the type of property you’re designing, who you’re working with and your own development experience. 

In many cases, your development experience will play a role in how long the process takes because experienced developers may have a better understanding of the various tasks involved, potential challenges, and how to navigate them efficiently.

Furthermore, the quality and experience of your contractors plays a role in ensuring your project runs smoothly. High-quality contractors typically have extensive expertise and experience in their respective fields. They understand best practices, regulations, and industry standards, allowing them to deliver work of superior quality and efficiency. 

Reputable contractors are reliable and accountable for their work. They adhere to project timelines and budgets, communicate effectively with clients, and take responsibility for resolving any issues or concerns that arise during the project. This is crucial to reducing hiccups in the development process that could otherwise cost you time and money. 

What is the Repayment Period for a Bridging Loan? 

Bridging loans are usually repaid within 12 months, but there can be a level of flexibility surrounding this. It’s common for bridging lenders to offer terms tailored to your circumstances, so if you have an assured means of repaying the loan within 16 months, it’s possible this can be arranged.  

Commercial bridging terms can be as long as 36 months. However, it is worth noting that if you extend the terms on a bridging loan, you will have to pay interest for the additional months, which can increase the overall cost of your project. 

How Do I Get Funding for a Self-Build? 

Bridging loans aren't typically offered by high street banks anymore, so you'll likely need a specialist lender. Each lender will have its own approach to assessing risk and the feasibility of each application. 

At Clifton Private Finance, we have an award-winning bridging team dedicated to driving results. We have relationships with lenders across the bridging market and access to the best deals. Our bridging brokers can guide you through the process and liaise with lenders on your behalf.  

Our team can advise you on the best financial solution and connect you with the most suitable lender for your circumstances.  

To see what we can do for you, call us at 0117 205 4827 or book a consultation below. 

Book Consultation »

FAQs

Do you need a valuation for a bridging loan?

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. 

How much can you borrow with bridging finance?

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. 

Do you need a deposit for a 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. 

Can I get 100% bridging finance?

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. 

Does a bridging loan make you a cash buyer?

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.

What is the longest bridging loan term?

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.  

Can I use a bridging loan to pay stamp duty?

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.  

Are bridging loans safe?

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. 

Can an 80 year old get a bridging loan?

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. 

What is the monthly interest rate on a bridging loan?

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.

Do banks still do bridging loans?

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.

How much do banks charge for bridging loans?

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.

Can you turn a bridging loan into 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.

Is a bridging loan more expensive than a mortgage?

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.

How are bridging loans paid?

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.

What is the minimum deposit for a bridging loan?

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.

Do you pay monthly payments on a bridging loan?

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.

How long does it take for a bridging loan to come through?

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.

What is the criteria for bridging finance?

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.

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