You don’t need an existing mortgage to get a bridging loan.
It’s a common misconception, but bridging finance is actually available to anyone with suitable property to use as security – whether they have a mortgage or not.
Picture this: you’ve found an incredible property at auction.
It needs renovation, but you can see its potential.
The catch?
You’ll need to complete within 28 days. That’s far too quick for a traditional mortgage, but perfect for a bridging loan.
What You Actually Need to Get a Bridging Loan
Bridging lenders focus on two main things: the property’s value and your repayment plan. They’re less interested in whether you already have a mortgage and more concerned about the security you’re offering.
You’ll need to be over 18 and have a UK presence, but beyond that, bridging loans are remarkably flexible. The property’s value needs to comfortably cover the loan amount, and you’ll need a clear plan for repayment – that’s what lenders call your ‘exit strategy’.
Common Uses for Bridging Loans
Property Auction Purchases
Auction properties come with strict 28-day completion deadlines. Traditional mortgages typically take 8-12 weeks, making them unsuitable for auction purchases. A bridging loan bridges this timing gap, letting you secure the property quickly and sort out longer-term finance later.
Read more: How to finance an auction property purchase
Buying Unmortgageable Properties
Some properties won’t qualify for standard mortgages. Perhaps they lack basic facilities, have structural issues, or use non-standard construction methods. A bridging loan lets you purchase and improve these properties. Once the improvements are complete and the property meets normal lending standards, you can switch to a conventional mortgage.
Read more: What Properties Can A Bridging Loan Be Secured Against?
Quick Property Purchases
Speed sometimes matters more than cost. You might spot a property being sold at a discount for a quick sale, or need to secure a business premises quickly. Bridging loans can complete in as little as seven days, compared to several months for standard mortgages.
Read more: How quickly can you get a bridging loan?
Get access to expert brokers and specialist bridging lenders
What Lenders Actually Consider
Property Value
Lenders will assess the property’s current market value and location. If you’re planning improvements, they’ll also consider the potential future value. Most will lend up to 75-80% of the property’s value.
Your Exit Strategy
Your repayment plan needs to be realistic and well-documented. Common approaches include:
- Selling the property after improvements
- Refinancing to a traditional mortgage once the property is mortgageable
- Using incoming funds from another source, like a business sale or inheritance
Costs and Considerations
Let’s talk about costs.
Bridging loans charge monthly interest rates that are higher than standard mortgages, but remember – these loans are designed for short-term use.
Before taking out a bridging loan, consider:
- The length of time you need the money
- How solid your exit strategy is
- Whether you’ll pay the interest monthly or roll it up into the loan
- Your backup plan if things take longer than expected
There will be an arrangement fee of 2% of the loan amount and this can often be added to the loan.
Making an Application
Getting a bridging loan is typically straightforward.
You’ll start with an initial discussion about your needs, followed by an agreement in principle. The full application requires proof of ID, property details, and documentation of your exit strategy. After the property valuation and legal work, funds are usually released within 1-3 weeks.
Read more: An introduction to bridging loans
Real-World Example
Here’s how a bridging loan works in practice:
Sarah spotted a Victorian terrace at auction for £280,000. The property needed £60,000 of work – the kitchen was missing, the bathroom dated, and there were damp issues. No traditional lender would offer a mortgage.
She secured a £210,000 bridging loan (75% of the purchase price) over 12 months. The renovation took 4 months, after which the property was valued at £380,000. She then moved to a standard mortgage, clearing the bridging loan and its costs.
Moving Forward
If you’re thinking about a bridging loan:
- Consider exactly what you need the loan for
- Plan your exit strategy carefully
- Get your basic paperwork ready
- Speak with a specialist broker who understands the whole market
While bridging loans don’t require an existing mortgage, they do need careful planning. They’re most effective when used for specific short-term purposes with a clear repayment strategy.
Need to know more?
Our team of independent brokers can help you understand your options and find the right solution. Contact us today for a no-obligation chat about your needs.
Frequently Asked Questions
Bridging loans and mortgages
From initial application to receiving funds typically takes 5-10 days. Some specialist lenders can complete in as little as 3 days for very urgent cases.
Read more: How quickly can you get a bridging loan?
Not necessarily. Bridging lenders focus more on the property’s value and your exit strategy than credit history. However, poor credit might result in higher interest rates or a lower maximum loan-to-value ratio.
Read more: Can you get a bridging loan with bad credit?
Not always. Unlike traditional mortgages, bridging loans are primarily secured against the property. However, some lenders might want to see income details if you plan to make monthly interest payments.
Non-status bridging loans are available up to 70% LTV without income or credit checks.
Yes, though lenders might require a larger deposit or charge higher rates. They’ll pay particular attention to your exit strategy and might want additional security.
Yes, existing tenants usually don’t prevent you getting a bridging loan.
If the property in question already has a mortgage but you need to borrow extra funds then there’s a couple of options to consider:
- Go back to the lender and ask for a further advance. This is often the cheapest option.
- Remortgage to a new lender using a capital raising mortgage.
- If the money is needed for just a short time consider a second charge bridging loan.
That’s fine. There’s no requirement for you to own your own home, or have a mortgage, and renting is perfectly acceptable.
Most lenders will want to carry out some credit checks, so make sure your credit report is OK and that you can be found on the Electoral Roll.
