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.
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 sure-fire 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.
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 organised, 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, minimising 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.
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.