High Street Banks can provide Bridging loans, but we tend to find that their processes can be slow and one of the advantages of bridging loans is the speed they can complete from application to funds being released.

We have access to a number of Banks that operate solely through advisers such as Advocate Finance and these Banks have a specialised bridging loan product; we can obtain approval within 4 hours and the banks can be fast to complete. 

The typical fees are

1. The lender’s arrangement fee is typically 1.95% – 2.00% of the loan amount. This fee is added to the loan.
2. Valuations fees – This is the fee a surveyor charges to value the properties for the Bank. This can range from £150 but increases as the value of the property increases. In some cases, an automatic valuation or desktop valuation can be used which is free of charge.
3. Solicitors fees – You will need to pay the fees for your solicitor to undertake the conveyance and also the lender’s solicitors fees for the security documentation.

A bespoke illustration will be provided for your individual circumstances to provide clarity on all fees and charges prior to commencing the process. This is free of charge

For bridging loans that are secured on a residential property that will be occupied by the applicant, the maximum term offered by lenders is 12 months. 

There is no minimum term but some lenders do have a minimum interest charge of 1 month, so you can settle the loan at any point but pay 1 month of interest.

Bridging loans completing within 4 weeks is not uncommon. Advocate Finance and the lenders we work with are very fast so the completion timings are done to the speed of the solicitors, this is why it is important to instruct a solicitor that can work efficiently and you explain to them the deadlines upfront before agreeing to work with them. 

Bridging loans can be from £50,000 to £5 million.

A 25% deposit is typically required but normally this would come from the equity in the property being sold, so no cash deposit is necessary.

Example: Bridging Loan
House being purchased: £450,000
House being sold: £750,000 with a £150,000 mortgage outstanding

The bank will take a charge over both properties as security for a £450,000 Bridging loan to purchase the property.
When the house is sold, it repays the existing mortgage and also the bridging loan; the surplus funds are sent to the owner.

The interest rates depend on the amount of the loan and the loan to value (LTV) being requested.

The loan to value represents the risk to the lender; the lower this is, the lower the interest rates. 

The interest of the loan is compounded month on month and added to the total facility. You only pay interest on the months you have the loan for.

The repayment of the loan can be by any funds that can be raised.  The normal situation is that the sale proceeds from the house being sold are used to repay the bridging loan, plus any interest accrued in that time.

A Bridging loan will affect your credit file in the same manner as other loans.
In this situation, the lender makes the payments (as there are no monthly payments from yourself), this will show on your report as paid each month; it will not negatively impact your report.

If you have a current residential mortgage and you are planning on using the equity in this property to repay the bridging loans when the property is sold, then the Bridging lenders will take an additional/second charge behind your current mortgage lender.

This is a practice mortgage lenders are familiar with and allow; we have not incurred any issues with it. 

The lender will take a first legal charge on the property you are buying and a second charge on the property you are selling, which has the current mortgage secured on the property. When the property is sold, the loan is repaid fully or partially repaid from the proceeds of the sale.

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