What do you need to get a bridging loan approved?
Bridging loans are a popular finance solution for commercial investors and developers looking to get started in property or increase their portfolio.
If you’re thinking of taking out a bridging loan, it’s important to note that every lender will have different criteria, but this article will take a look at the general bridging loan requirements for most lenders.
While you can directly approach a lender and submit your application yourself, an experienced broker will establish a lender that is best suited for your situation, ensure your application is completed correctly, and help make the process run smoothly so that your loan is approved as soon as possible.
Most lenders will require the following information:
- Full name
- Date of birth
- Current address
- Residential status
- Employment status and details
- Borrowing entity (Ltd company/LLP/personal)
- Other owned properties
Lenders will require a brief summary of your background and experience, if any, in commercial property. They’ll also need to know why you need a bridging loan and how you plan to use it.
A lender will require any information on the property or land you intend to purchase or refinance using the bridging loan:
- Type of property
- Use of property
- Condition of property
- Location of property
- Security address
- Purchase price and property value
- Tenure (Freehold/leasehold)
If you are purchasing a property to refurbish it, either to sell on or keep as an investment, you may also be asked to detail:
- The proposed refurbishments you will be carrying out
- The cost of the work involved
- The property value once the work has been completed
Loan amount and terms
The lender will require details about the amount you wish to borrow and if you are able to provide a sufficient upfront cash contribution.
Most lenders will go to a maximum 75% LTV (loan to value). This includes any retained interest and any arrangement or broker fees. Ramsay & White are able to offer loans of up to 100% of the purchase price.
The lender will also need to know how long you would like the loan for.
Bridging loans are a short-term finance solution designed to be repaid in full over a fairly short period of time. Most non-regulated bridging lenders will lend up to a maximum of 18 months for a commercial project, however, FCA regulated lenders can only lend up to 12 months.
In order for a lender to provide you with the required funds, you will need to establish how you plan on paying back the loan. Getting this right is crucial and can be the key factor in the bridging loan being approved or denied.
This will require you clearly stating how and when you plan on paying back the loan, usually by selling the property or refinancing onto a long-term solution such as a BTL mortgage.
Bridging lenders will need to assess the level of risk involved with lending to you and typically require collateral in the form of property. Loans can be secured on the value of one or several combined properties. The agreement may state that if the loan is not repaid, the lender will take over ownership of the property.
The lender may also require the following documentation:
- Proof of ID and address
- An asset and liabilities statement
- An AIP for the follow-on mortgage (if applicable)
- A property portfolio schedule (if applicable)
- A detailed schedule of works: costings, timeframes, plans and planning permissions (if refurbishing the property)
- Your bank statements from the last three months
How does a lender assess your application?
The lender will take into consideration all of the above details before approving or denying the loan, however, every lender will assess each application on a case-by-case basis. Providing as much information as possible will increase the chances of a bridging loan being approved.
It is beneficial to outline any adverse credit or concerns from the get-go as the lender will learn this further down the line anyway and it may cause avoidable complications and delays.
The key is to be open and transparent in your application and with your broker, this way they can tailor the application accordingly so that there’s a better chance of it being approved.