Bridging loans 29 August 2022 at 10:39PM in Loans 5 replies 3.7K views

LibbyWick

Hi, does anyone know anything about bridging loans? 

MalMonroe

Hi, there's  quite a good explanation here -

https://www.money.co.uk/bridging-loans/what-is-a-bridging-loan

and also, here -

https://www.which.co.uk/money/mortgages-and-property/home-movers/bridging-loans-explained-afsnw3h37sc0

Ebe_Scrooge

In essence it's a short-term mortgage.  Say you've got a house to sell, and you've found a house you want to buy.  You want to buy the new house now, but you're waiting to sell your old one.  A bridging loan is like taking a second mortgage against your old house, which gives you the cash to buy the new house.  Then, when you eventually sell you old house, you use the proceeds from the sale to repay the bridging loan.

They're a convenient way to "bridge the gap" between selling your old house and buying the new one - but they are very expensive, and only designed for short-term use (typically just a few weeks or a few months maximum).

Finbri

Also, if you want to know 'What questions will the bridging loan application form ask?' then these are typical Q's that you might be asked:

What questions will the application form ask?

A typical application form can be several pages long, if you're struggling to understand how to answer any questions on your loan application form the fastest way to resolve it is to speak with your broker or lender as soon as possible. Clearly you should always answer truthfully and completely. Save yourself some time and get a head start. Here's a list of the questions you'll likely need to supply answers to:

1. Applicant details - such as:
   • full name, residential address, postcode, time at address, and if you've been there less than 3 years, you'll need to provide 3 years of previous address history.
   • residential status, NI number, employment status, occupation (job title & nature of business), length of employment, annual income, dependent children & ages, additional income, date of birth, nationality, marital Status, phone, email, any previous names.
2. Company name - if the loan is going in a company or SPV.
3. Loan details - such as:
   • Net loan required, term, whether the loan will be a 1st charge, 2nd charge, 3rd charge or equitable charge, time constraints & reason, purpose of borrowings, repayment proposal.
4. Security details - such as:
   • Address 1, postcode, property type (residential, commercial, semi-commercial, land), rental income if any, number of bedrooms, title number, estimated market value, equity, property description, selling agent, selling contact name, contact phone, whether the property ever been used as main place of residence by applicant or close family member, whether the applicant will or does reside at the property.
5. Solicitors details - if you're not opting for dual representation then you'll need to supply this such as:
   • Name of company, SRA manager, address, postcode, contact name, contact phone, contact email.
6. Credit history - such as:
   • Whether you've ever been convicted or have a criminal record, whether you had any court order been made against you or any companies, whether you’ve been directors or partners of a company, whether you have ever been declared bankrupt, the subject to an IVA or made any composition with any creditors, whether you have had any arrears on any mortgage or credit agreements.
7. Company / SPV Details - (if applicable) such as:
   • Name of company, registered address: postcode, registration number, date of registration, director name(s), shareholding %, business type, length of time trading.
8. Accountant - such as:
   • Name of company, address, postcode, contact name, contact phone, contact email.

stefanovitch

If you're intending to contact a broker to help you get bridging finance then here's some questions you might want to ask them once you've explained your requirements / circumstances - just to set your expectations…

• Do you arrange regulated or unregulated loans?
  (If the loans secured against your home then you'll need a regulated loan) 
• How long does a bridging loan take to approve in principle?
  (State: please be realistic - I'm trying to set my expectations here - do this especially if you have a deadline in mind that you need to meet)
• Do you charge an application fee?
• If you do charge an application fee, is it refundable and are there any terms associated with the refund? 
• How long does a bridging loan like the one I need generally take to complete from application? 
• What are the criteria for a bridging loan?
  (If its secured against a property then what's the max Loan To Value I can obtain?) 
• What is the average interest rate on the kind of bridge loan I need?
  (Ask them whether they've recently completed any similar bridging loans, and if so, ask what rate they achieved) 
• What is the likely interest on this bridging loan? 
• Do you charge an arrangement fee, if so what is this?  
• What are the total fees on this bridging loan? 
• Will I need a solicitor for a bridging loan or can you provide dual representation? 
• Will I need the services of an independent financial advisor to complete this application?
  (If so, how much is that?)
• Do you need to complete an in-person valuation of the property or will it be a desktop valuation?
  (if so, how much is that typically?)

If you get an initial proposal from a broker, I'd also ask them to answer these questions in writing before committing to an application fee.

Moranos

You should only really be using a bridge loan if you’re a real estate investor or real estate developer because this is when the benefits outweigh the costs.