Yes you can get a bridging loan to buy a house.
These short term property loans are becoming more popular with buyers who need quick and flexible finance. If you’re stuck in a property chain, buying at auction or looking at a property that needs work before it’s mortgageable, bridging finance might be the answer.
Let’s take a look at how bridging loans work for house purchases and see if one could be for you.
What is a Bridging Loan for House Purchase?
A bridging loan is a short term secured loan that allows you to buy a property before you have a mortgage in place or while you’re waiting to sell another property.
They are temporary loans, secured against property.
For residential property purchases these loans typically run between 3 and 12 months.
You’ll secure the loan against property – either the one you’re buying, your existing home or sometimes both. The key feature of bridging loans is speed and flexibility.
While you might wait months for a mortgage, you could have bridging finance arranged in just a few weeks.
Read more: A Guide to Bridging Loans
Why Do People Use a Bridging Loan?
There are many different reasons why people use bridging finance to buy a property. Here are just a few of them.
Breaking a Property Chain
Property chains can be stressful and uncertain.
Imagine this: you’ve found your dream home but your buyer pulls out. Without alternative finance you could lose the property you want. That’s where bridging finance comes in.
A bridging loan could provide the funds you need to secure the new property, while you find another buyer for your current property.
Read more: How To Use Bridging Finance To Break A Property Chain
Auction Property Purchases
Auction properties can be great value but come with tight deadlines.
After winning a property at auction you need to pay a cash deposit of 10%, the same day. You then have 28 days to come up with the rest of the money and complete the purchase.
Mortgages rarely fit these short timeframes.
Auction bridging finance gives you the time to sell the property or arrange a standard mortgage after you take possession.
Read more: Using bridging finance to buy an auction property
Buying Unmortgageable Property
Some properties that standard mortgage lenders won’t consider can still be good investments.
This includes properties with no functional kitchens or bathrooms, those that need structural repairs or houses that require significant renovation work.
Bridging finance allows you to buy these properties, do the work and then sell or refinance with a standard mortgage.
Read more: What Properties Can A Bridging Loan Be Secured Against?
Get access to expert brokers and specialist bridging lenders
How Bridging Loans Differ from Mortgages
Bridging loans and mortgages serve different purposes.
Speed is the key difference – bridging loans can complete in days or weeks not months. This is because the process is streamlined and focused on the property value rather than complex affordability checks.
Bridging lenders look at properties and circumstances differently than mortgage lenders.
They’ll consider properties in poor condition and often work with complex income situations. While both need security, bridging lenders are more flexible about what they’ll accept.
The repayment method is different too.
With bridging finance you’ll need to have a clear plan to repay the whole loan – your exit strategy might be to sell a property, get a mortgage or use other incoming funds.
Who Can Get a Bridging Loan to Buy a House?
Bridging loans are more accessible than you think.
Unlike normal mortgages, where income and credit scores dominate the decision, bridging lenders focus on your exit strategy and the property itself.
You need to be a UK resident aged 18/21 and over.
You’ll find bridging loans available if you own property in the UK and can show how you’ll repay the loan. There’s usually no maximum age limit and past credit issues won’t block your application if you can prove a solid repayment plan.
Highly experienced brokers can help British expats and foreign nationals living in the UK.
Regulated or Unregulated?
If a bridging loan is to be secured on a house that is, or will be, your home, then it needs to be classed as ‘regulated’.
Regulated bridging loans come under the remit of the Financial Conduct Authority (FCA), who will set out rules and procedures that all brokers must follow.
You can’t choose to have a regulated loan, or not. Your circumstances will decide.
Regulated bridging loans will provide consumer protection and have a more detailed application process. The loans can only have a maximum term of 12 months.
For potential borrowers, the downside is that there are fewer lenders, the LTV’s are more conservative and the criteria more rigid.
Read more: Are bridging loans regulated by the FCA?
The Application Process
Getting a bridging loan is more straightforward than you might expect.
It all starts with a simple conversation about what you need – how much you want to borrow, details about the property and how you’ll repay the loan.
Your broker can then begin to research the lender’s. They will speak to the underwriters to get confirmation of your suitability, with an indication on rates and fees.
You’ll then move into the documentation phase.
The paperwork is often simpler than a mortgage. You’ll show proof of who you are, details about the property you’re buying and information to support your repayment strategy.
A surveyor will visit the property, usually within days of your application.
This valuation helps the lender understand how much they can lend you. Then solicitors will handle the legal work including property searches and preparing the loan documents.
The whole process is quick because bridging lenders use a streamlined process.
Costs and Charges
Bridging loans are for a specific purpose and their costs reflect that. You’ll pay an arrangement fee, usually 2% of the loan amount which cover the lender’s set up costs.
The valuation and legal work also have fees. You’ll need to pay for the property valuation, the lender’s legal costs and your own legal representation.
When it comes to interest charges you may have some choice over how this is set up. But this very much depends on the lender.
You can make monthly payments, have the interest rolled up to pay at the end or choose retained interest where it’s taken from the loan at the start. Each option has its benefits and the right one depends on your situation.
Most lenders require 20-25% of the property’s value as a deposit, although this can be lower if you have additional security.
These costs may seem high compared to a traditional mortgage but remember bridging loans are not for long term borrowing.
Finding the Right Bridging Loan
Success with bridging finance isn’t just about finding the lowest rates – it’s about finding the right one for you.
Working with a specialist broker really makes sense.
They can search the whole market, find lenders who understand your situation and negotiate better terms.
When comparing options think about the total cost, term flexibility and what happens if your repayment plans change. Look into any extra fees and check the lender’s reputation in the market.
Related reading: Why Buy-to-Let Landlords Use Bridging Finance
Exit Strategy Planning
Your repayment plan (exit strategy) is at the heart of every bridging loan.
If you’re planning to sell a property to repay the loan, think about current market conditions and realistic selling timescales. You may need to factor in property improvements and create a solid marketing plan.
For those planning to refinance to a standard mortgage, consider the timing. You’ll need to meet the mortgage lender’s criteria, ensure the property meets their standards and have your income documentation ready.
Smart borrowers have a plan B.
If your main repayment plan hits a snag you might sell other assets, use savings or extend the loan term.
While lots of bridging lenders aren’t interested in your job or how much you earn, this will change if your exit plan involves getting a new mortgage.
The bridging lender will want to see some evidence that this is possible and may ask for proof of your income and affordability.
Frequently Asked Questions
Our bridging loans start from £150,000 with no upper limit. The maximum loan to value is normally 75-80%.
Yes, many lenders will consider applications despite bad credit. They focus more on your property’s value and exit strategy than credit history.
Yes, there are no restrictions on whether you have owned property, or if you already have a mortgage.
Related: Can You Get a Bridging Loan Without an Existing Mortgage?
Yes, you will need to provide 20-25% as a cash deposit, depending on the lender.
Read more: Do you need a deposit for a bridging loan?
Yes, bridging loans work well for auction purchases, as they can be arranged within the 28-day completion deadline.
Read more: How to finance an auction property purchase
Yes, you’ll need a solicitor to handle the legal aspects which includes conveyancing. With a bridging loan you are required to pay for the lender’s solicitor, as well as your own.
Read more: Do I Need a Solicitor for a Bridging Loan?
In theory, yes. But inform the lender of your intentions first. Some might require specific terms for rental properties.
Remember that bridging finance is for the short-term only. It’s very expensive and the lenders are not interested in long-term loans.
Most property types qualify, but your loan will be based on the property’s valuation figure.
So derelict and run-down properties can be financed, but the valuation will reflect the condition (and risk).
Read more: What Properties Can A Bridging Loan Be Secured Against?
Yes, this is possible. You may choose to buy a property in this way to snap up a bargain, or to remove yourself from the stress of a property chain.
Yes, loans can be used for any type of residential, semi-commercial and commercial investment properties.
This will include; buy to let, holiday let, service accommodation, multi-unit freehold blocks, mixed-use, shop with a flat above and all commercial properties.
