Fast Bridging Loan to Raise Deposit for a Larger Family Home

It’s a fairly common bridging loan question: can you use a bridging loan for a house deposit?

And the answer is: yes. as long as the bridging loan is not secured against the property you’re buying, and you’re not selling that property as the exit strategy.

Here’s how it can work in practice.

The Scenario

This client approached us in the wake of a collapsed property chain.

He was selling his property and buying a new £875k home for his family simultaneously.

However, the sale of his property had fallen through at very short notice, and he was now at risk of losing the home he had his heart set on. This is a very common bridging loan scenario, and we were happy to help and offer some solutions.

The Solution

Because the client was looking to finance the new home with a standard mortgage, he only needed to raise funds for the deposit, and not the full purchase value. This meant he only needed a bridging loan of £215k.

• £100k of this would clear the first charge mortgage on his current property
• And £115k would be used for the deposit for the new purchase.

Normally, it’s not possible to use a bridging loan for a mortgage deposit, simply because you need to repay a bridging loan within 12 months, which requires an ‘exit strategy’ for your loan.

However, in this case, the client was able to secure it against his existing property that was already on the market and awaiting sale: there was a clear exit strategy in place, and the loan to value was low enough for the deal to work.

This would save £500-600 compared to having an in-person valuation, and would save about 2 weeks in administration delays.

We also ensured our client used the same solicitor as the lender (known as joint legals), which significantly reduced timescales further.

The end result was an offer secured for our client just 2 days after the application was made – and completion came through just 26 days after application.

Our client could secure their new home, and they had a full 12 months to sell their existing property, giving it plenty of time on the market to reach its full value.