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Bridging Loans: How Much Can I Borrow?
How much can you borrow with a bridging loan? Do you need a short-term finance solution to inject cash quickly without the waiting time of traditional longer-term borrowing?
Written by: Sam Hodgson
Short-term finance such as bridging loans can be a very helpful form of finance for the right borrower, depending on your circumstances.
They can solve time-sensitive property purchases such as properties bought at auction, unmortgageable properties or gaps in finance when upsizing or downsizing.
The amount you can borrow is dictated by your current situation and relies on multiple different factors.
Key Takeaways
- Bridging loans are short-term financing solutions used for time-sensitive situations, like auction purchases, unmortgageable properties, or bridging gaps in property transactions.
- The amount you can borrow depends on factors such as the lender's criteria, your financial circumstances, and the loan-to-value ratio (LTV).
- Higher equity or a bigger deposit can usually afford you more favourable borrowing terms.
In this guide:
What Determines How Much You Can Borrow?
Let us do all the hard work of finding the right bridging lender for your circumstances. We secure bridging finance for applications of all types, and we negotiate competitive lending to meet your needs and timescale.
Fergus Allen
Head of Bridging
What Determines How Much You Can Borrow With a Bridging Loan
1. Your lender
This is the key area where advisors like us make a difference.
Our guys have access to private and specialist lenders not available to walk-up members of the public. The general public will not know about them, and because lenders are quite small, they don’t have customer service departments so aren’t set up to deal with direct approaches.
Plus, there are a lot of lenders out there offering bridging loans. There isn’t a UCAS system for getting offers on a bridging loan application – you have to approach each lender individually, give them the information their application process requires, and then wait to see if it suits their criteria.
And that will take you, as an individual customer, a fair bit of time. And while you’re waiting for their answer you’re wasting time.
A good broker has all the criteria for all the different types of lenders across the market right there in front of them. They know who will consider your application and will take it right to them.
The wrong lender won’t consider your application so favourably – they’ll offer you less because they’re more concerned about this type of risk. Or they’ll turn you down.
2. Your financial circumstances
Our experienced, well-connected brokers will know which lenders will take a more generous view of tight financial circumstances, or a less-than perfect credit score.
You might think that a broker couldn’t actually improve your financial circumstances, but you’d be surprised. Our brokers advise clients on how to tidy up their credit scores and how to get outdated adverse credit issues fixed.
They will also come up with solutions you might not have considered, such as securing the lending against more than one property to increase the amount you can borrow.
The value of your property will generally directly affect how much you can borrow.
Obviously there is not much we can do regarding the value of your assets, but we can help by recommending a lender who would do a drive by/desktop valuation, which would certainly speed up the application process – although, this is usually only considered when you’re not asking for a high LTV on the property.
4. Loan to value (LTV) ratio
This is decided by the value of your property. But our team know the LTVs that will be applied by all the lenders they can take your application to. The bigger the deposit for your bridging loan you can put down, the better.
5. Location of your property
How much you can borrow depends the location of your property. Isolated rural properties, for example, may not have a big pool of potential buyers if everything goes pear-shaped and the lender needs to sell your property to regain their investment)
For example, properties in Scotland north of the Edinburgh-Glasgow belt can sometimes be a challenge, and likewise Northern Ireland. But our brokers will know which lenders might consider it, and how to present an application in the most positive light.
Understanding the Costs
Use our bridging loan calculator tool below to get an indicative quote of what a bridging loan could cost you.
Related: Are Bridging Loans a Good Idea?
Recent bridging loan rates we've secured for clients:
Rates from: Downsizing/Upsizing Releasing Funds From Your Home Short-Term Lease Finance Auction Purchase As at 9th September 2024 Rates from: Light & Heavy Refurb Finance For Unmortgageable Properties Land Purchase with planning As at 9th September 2024 Rates from: Up to 80% LTV Minimum Loan £500k Minimum net income £100k As at 9th September 2024 Thank You for your interest - please complete the form below and a member of our team will be in contact.Residential
Buying Before Selling?
0.55% pm
Development & Refurb
Fast Finance
0.55% pm
Residential
Large Bridging Loans
0.55% pm
Contact Us
Bridging loan interest rates can vary depending on your lender, loan-to-value, exit strategy, the current market, and other factors.
See the latest market news below.
2024 Bridging Market Update
The bridging market has had quite a transformation in the past few years. With rates starting at 0.55% per month, the costs aren’t dissimilar from those of a mortgage, and the combination of flexibility, quick turnaround time and less stringent eligibility criteria has led to bridging finance growing in popularity.
It’s now seen as a product in its own right instead of an expensive alternative to long-term finance.
Our finance brokers are seeing more repeat clients, particularly investors who have turned their attention to property flipping considering the slim profit margins the buy to let market has been seeing. HMO conversions have also grown in popularity amid more rigid rental legislation.
According to our team of advisers, a high volume of first-time borrowers already have an understanding of bridging loans before approaching us, showing that bridging is becoming more recognised in the industry.
As bridging finance becomes more mainstream, lenders are reviewing and reducing rates more frequently, offering more flexibility around costs.
Are There Limits?
Generally speaking, £25,000 is the starting point from which a bridging loan would be an appropriate form of finance.
If you are looking for a loan lower than this, then you may want to look at other forms of borrowing, such as a personal loan.
There are no upper limits on the amount of money you can borrow through bridging. The cap on your borrowing will be set by your situation and the lender involved. In some cases, very experienced developers are able to borrow 100% of their development costs as a bridging loan.
The amount you will be able to borrow depends on various factors, including the type of property, your intention for the property, and the value of your available assets.
What Can I Borrow Against?
Typically, the more you have in terms of property assets, then the more you can borrow.
If you are securing your loan against multiple properties then this will impact how much you can borrow – the greater the value of the assets, the more that you can borrow. The equity you have in each of these properties is very important - the more equity you have in your properties, the more you can borrow.
You do not necessarily have to already own a property in order to get a bridging loan.
Bricks and mortar assets are not the only kind considered by various lenders in bridge borrowing. Other high-value assets can also be used as security such as investment portfolios, pension, fine jewellery, fine art and high value cars. In order for these to be considered as security when applying for a bridging loan, but these must be valued at £1M+.
What if I've Already Had a Bridging Loan?
We can arrange re-bridging in the instance that you are not going to execute your exit strategy as originally planned. This could happen for a number of reasons, for example should you not be able to find a buyer for you home within the agreed loan term, as originally hoped. If you are in a similar situation, get in contact with our knowlegable team who can help you cross this bridge.
Once you get in contact with us, one of our experienced brokers will talk you through the process of getting a bridging loan and discuss the details of your case.
Once we have those details, we are able to make a judgment call on how much you can expect to be able to borrow from the right lender for you.
We have access to a large range of leading UK lenders, including many lenders which would not be available to borrowers directly. This means you will have more choice of finding the right lender for your case.
We have helped many high net worth clients cross the bridge in their finance needs. Read through our wealth of case studies to see if we have dealt with a situation similar to yours.
To see what we can do for you, call us at 0117 205 4838 or book a free consultation below.
FAQs
Understanding the difference between net and gross calculations is essential when comparing deals from bridging loan lenders. The calculation determines the maximum LTV (Loan-to-Value), how much you can borrow, and how much you will eventually repay. Here’s the difference: When calculating the net loan amount for bridging loans, the borrower deducts the loan costs and additional fees (such as the arrangement fee) from the total loan amount - this is known as net loan calculation. Contrary to that, gross loan calculation is based on the loan amount the borrower can receive without deducting any costs or fees. In brief, the gross loan calculation represents the total amount available to the borrower, while the net loan represents what the borrower ultimately receives after deductions. A common complication arises when it comes to comparing bridging lenders, as different lenders advertise their bridging loan products differently. The upshot of this, is that it can become difficult to determine if a higher LTV (loan-to-value) represents the actual amount you could receive. Lenders typically use a gross loan calculation when advertising or promoting their bridging loan products. This is because the gross loan amount represents the maximum loan amount the borrower is eligible to receive, and can be used as a marketing tool to attract potential borrowers. Nevertheless, the net loan calculation is used when negotiating an agreement, which is the amount the borrower will receive after deducting fees and other costs. Borrowers are responsible for repaying this amount, and lenders will use that amount to determine repayment schedules and other loan terms. How a broker can help with bridging loan calculations A broker can assist with bridging loan calculations by providing clarity, expertise, negotiation skills, and a comparison of loan options to help you make more informed decisions. A first charge bridging loan refers to a bridging loan that is the only charge against the property, i.e., there is no existing mortgage on that property. A second charge bridging loan is when there is already a mortgage on the property that the bridging loan is being secured against. In the event of repossession, the 'first charge' has the legal right to be repaid first, before the second charge, which is why second charge loans can be slightly more expensive as they're a greater risk to lenders. It is still entirely possible to secure a second-charge bridging loan and they are common within the industry. Yes, you can get a bridging loan with bad credit. While lenders will look at your credit score and factor it into your application, there is no requirement for regular loan servicing with a bridging loan, and so your income is not analysed and your credit score is significantly less important than with a mortgage. Almost all regulated bridging loans are short-term, and have a duration of 12 months. Bridging loans are short-term by nature. However, there can be some flexibility on term length, particularly for unregulated bridging. For example, bridging for development projects, flipping properties, buy to let bridging loans and commercial bridging loans can all have longer terms up to 36 months. Some bridging loan lenders allow you to extend your term if at the end of 12 months your property hasn't sold or your alternative funding hasn't come through yet - however, this is down to the lender's discretion and there are no guarantees. It's important to be aware of the risks of bridging loans, and your property can be seized and sold to compensate for failure to repay. A bridging loan exit strategy is simply the way in which you plan to repay your bridging loan. The most common exit strategies are selling an existing property, selling the property you're purchasing, refinancing with a mortgage, or a combination. Other more unique exit strategies can include selling a business, receiving a pending inheritance, or receiving a large tax rebate. Here are some of the most common alternatives to bridging loans: We break down each of these other financing tools in our full guide to alternatives to bridging loans. While none of these options provide the flexibility, loan size and low interest rates that bridging loans do for property transactions, you may find they are more appropriate finance options for your specific situation. No, there is no strict age limit for securing a bridging loan. Bridging loans are typically 12 months in duration, which means that there aren't age limits in place like there are for mortgages that can last for 25+ years. The main example where age may be an issue is if you plan to refinance your bridging loan with a standard mortgage. In which case, you'll need to be eligible for a standard mortgage to qualify for your bridging loan - and if you are approaching retirement age, this could be an issue and you may be rejected for a bridging loan. However, we work with specialist equity release and lifetime mortgage lenders that can provide a Decision in Principle for later-life lending (if it's feasible) so that your bridging loan can be approved if it makes sense with your broader strategy. There are two types of bridging finance: regulated bridging loans and unregulated bridging loans. It simply depends on the intended use of the property you're purchasing. When you or a family member intend to live in the property you’re purchasing with your bridging loan, you’ll need a regulated bridging loan. If you're getting bridging finance on property that you or a family member will not be living in, or if it’s a commercial property, then you’ll need an unregulated bridging loan (commercial bridge loan). And if you intend to sell the property to repay your bridging loan (flipping the property) instead of refinancing or selling another property, you’ll get an unregulated bridge loan. Regulated bridging loans are authorised and regulated by the FCA and are usually locked to a 12-month maximum term. Unregulated bridging loans, meanwhile, can have extended periods of up to 36 months and are generally more flexible. If you’re unsure, it’s best to speak to a qualified adviser to go over exactly what you need and find the best bridging loan for you. Yes, your bridging loan lender will require a new valuation to be carried out for all properties in your bridging loan transaction. In some cases, we can work with lenders that can facilitate a 'desk valuation', which is a valuation carried out online based on the local property market, images of the property and the specifications of the home - this can save a considerable amount in fees and speed up your application, but it's not always possible, especially for higher value properties. 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. You don't necessarily need a deposit for a bridging loan in the traditional sense of cash reserves, but you do need security for your loan in the form of another property or asset to keep the loan-to-value below 80% at a maximum. For example, if you're buying a £300k property with a £300k bridging loan, you'd need another property to secure the loan against along with the property you're buying, or else your loan to value would be 100%. You can effectively secure a loan for 100% of a property value, but only if you have other property as security to keep your overall loan-to-value below 80%. So, if you're getting a loan for 100% of a property value, you'll need another property in the background to secure it against. The easiest way to see if you're eligible is either to give us a call or use our bridging loan calculator that automatically calculates your LTV. Using funds from a bridging loan to purchase a property puts you in a strong position as a buyer - similar to that of a cash buyer. Being a cash buyer is attractive to sellers because there is no onward chain requirement, and the funds are ready to go for the purchase. Using a bridging loan also eliminates the need for the chain to complete, and puts you in a position where funds can be available in a matter of weeks for completion; effectively rendering you a cash buyer to prospective sellers. Regulated bridging loans (for residential properties) are typically 12 months, however, some non-regulated bridging loans for buy to lets and commercial properties can be up to 36 months. Some lenders are more flexible on term durations than others, and it can be a case-by-case basis as to whether you'll get approval for a longer loan term. 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 generally considered safe provided they are used for suitable property transactions. Speaking to a bridging loan adviser is recommended if you're unsure about the risks and suitability of a bridging loan for your situation. Generally speaking, the main risk of a bridging loan is that if you cannot repay the loan, your property can be repossessed and sold to clear your debt. For example, if you take out a bridging loan to buy a new property but your existing property fails to sell and you cannot recoup the funds, this could become a risk. However, bridging lenders always require their own valuations for any property involved in a bridging transaction to combat this. Another example could be that you're unable to secure a mortgage to refinance your bridging loan. At Clifton, we make sure your remortgage plans are sound if this is your bridging loan exit strategy, and can even arrange your mortgage for you through our dedicated mortgage advice service on the other side to smooth the process. 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. No high street banks currently offer bridging loans. Instead, bridging loans are provided by specialist short-term finance lenders. At Clifton Private Finance, we are a whole of market brokerage that deals with multiple bridging loan lenders, and we act as an intermediary between clients and the lender ensuring the process is smooth and hassle-free, and making sure our clients are getting a good deal. 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. You cannot turn a bridging loan into a mortgage, but you can repay a bridging loan with a mortgage and effectively refinance it into a long-term arrangement. This is common when buying an unmortgageable property with a bridging loan, carrying out refurbishments, and then mortgaging it once it is wind and water-tight and a new valuation has been carried out. This is also common for properties bought at auction where a mortgage would be too slow to arrange, and so a bridging loan is used which is then replaced with a mortgage later. 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. If there is a purchase involved, bridging loans are paid from the lender to the lender’s solicitor, then to the client’s solicitor, and then to the seller’s solicitor - so, you as a client will not see the funds in your own account - similar to a mortgage. If there is no purchase involved (for example, for a bridging loan for home improvements before selling), the funds go from the lender to the lender's solicitor, to the client’s solicitor, and then to the client's bank account. In terms of how bridging loans are repaid by you, they are repaid as a lump sum, either at the end of your term or during it. You can choose to either 'service' the interest, so pay the interest back monthly, or roll it up into the value of the loan to also pay this off as a lump sum along with the capital. 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. You do not pay monthly instalments towards the capital loan of your bridging loan. Some bridging loans require you to repay the interest accrued each month, but most lenders will actually give you the option to roll this up into the loan value, meaning you repay it with your lump sum at the end and have absolutely no monthly commitments. It's worth noting that as soon as you pay off most bridging loans, you stop accruing interest - so, the quicker you pay it off, the less expensive it will be, and there are typically no ERCs (early repayment charges). 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.
What are net vs gross bridging loan calculations?
Which calculation do lenders use for bridging loans?
What is the difference between first-charge and second-charge bridging loans?
Can you get a bridging loan with bad credit?
How short-term are bridging loans?
What are bridging loan exit strategies?
What are some alternatives to bridging loans?
Is there an age limit on bridging loans?
Are bridging loans regulated?
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?
