If you’re looking at bridging finance you’ll want to know about deposit requirements.
We’ll explain what you need to put down upfront, cover alternatives to cash deposits and how different property types affect what lenders will lend.
What are Bridging Loans and How do they work?
Bridging loans are short term property finance when you need to move fast.
They’re useful when traditional mortgage timescales don’t match your needs. These loans are over 3 to 24 months only, with most borrowers repaying through either selling the property or refinancing to a longer term mortgage.
You’ll find bridging loans useful for property auctions where you need to complete within 28 days. They’re also perfect when you’ve found your next home but haven’t sold your current one – the bridging loan helps you secure the new property while you wait for your sale to complete.
Many property developers and investors use bridging finance for refurbishment projects, especially when a property isn’t suitable for a standard mortgage. For example if you’re buying a house without a kitchen or bathroom, most mortgage lenders won’t help but bridging lenders will.
What matters most to lenders is your exit strategy – they’ll want clear evidence of how you’ll repay the loan. There’s no monthly payments, you pay everything back at the end of the term.
How much deposit do bridging lenders require?
Most UK bridging lenders require a deposit of 25% of the property’s value.
This means they’ll lend 75% LTV (loan to value). For a property worth £600,000 you’d typically need £150,000 as a deposit.
These are not set in stone – they depend on your exit strategy, property type and current market conditions.
For a standard residential property worth £600,000 a bridging lender would lend 75-80% LTV so you’d need a £120,000 deposit. But for a commercial property at the same value they might only lend 65% LTV so you’d need £210,000 upfront.
Different properties have different requirements.
Residential properties can secure up to 80% LTV as they’re easier to sell if needed. Commercial properties need larger deposits of 35-40% so a shop unit worth £300,000 would need £105,000-£120,000 upfront.
If the property is in poor condition, or made from non-standard materials, the maximum LTV will be lower.
Land purchases vary. With planning permission in place you can secure up to 65% LTV.
Get access to expert brokers and specialist bridging lenders
Can you get a bridging loan with no deposit?
Yes – but you’ll need additional security.
Many borrowers use equity in another property instead of a cash deposit. For example if you own a house worth £400,000 with no mortgage you might use this as security for a bridging loan on another property.
By giving the lender security over other assets you own, you can achieve funding of 100% for a new property purchase.
You have several options if cash isn’t readily available. Refinancing existing property is common and some lenders will consider business assets as part of your security package.
Read more: What is a cross collateral bridge?
What affects your deposit requirements?
Your deposit contribution lowers the lending risk for a lender. So deals that are deemed higher risk, will need a higher deposit and lower LTV.
Property type and condition makes a big difference.
Well maintained properties in good areas require smaller deposits than those that need work.
Your exit strategy matters too – if you’re selling lenders will look at local market conditions and your timescale. Strong evidence to support your exit strategy may help you get a higher LTV and reduce your deposit requirements.
Security and LTV
Bridging loans use a legal charge over property as security and these are formally noted at Land Registry.
Most lenders take a first charge, like a regular mortgage. This gives them first claim on the property if you can’t repay the loan and usually the best rates and highest LTV ratios.
If you already have a mortgage in place, bridging lenders may accept a second charge position. This puts them second in line for repayment if the property needs to be sold.
Because this increases the lenders risk you’ll usually need a larger deposit and may pay higher interest rates.
LTV is simple – loan amount divided by property value multiplied by 100.
For a £150,000 loan on a £200,000 property your LTV is 75%. Different lenders have different maximum LTVs. Some will go to 80% for strong applications and others won’t go above 65% for certain properties.
Remember putting down a bigger deposit should better interest rates and a wider choice of lenders.
Read more: What Properties Can A Bridging Loan Be Secured Against?
How to apply for a bridging loan
Bridging loan applications are quicker than traditional mortgages.
To start you’ll need:
- Property details
- Your exit strategy
- Deposit source evidence
- Property experience
- Existing loans
Getting started is easy. Most borrowers work with specialist brokers who know the bridging market. They’ll help find the right lender and often get better rates than you would directly.
While short-term bridging loans are well-known for being quick to arrange, don’t leave everything until the last moment. Your broker can achieve a better outcome when they have time to approach different lenders and negotiate on your behalf.
The secret to a smooth application? Preparation. Have your documents ready and a clear plan for your deposit and exit strategy. This speeds things up – when time is of the essence.
Next
If you’re considering bridging finance talk to a specialist broker. They’ll explain your choices and may find ways to structure the loan you hadn’t thought of.
Want to know your bridging loan options?
Let our experienced brokers evaluate your situation and find the solution for you. Contact us to talk through your plans – we’ll put you in touch with a bridging finance expert.
Frequently Asked Questions
Bridging loan deposits
This does depend on the extent of your poor credit and the overall deal in the eyes of a lender.
Some lenders might ask for a larger deposit if you have poor credit. However, some specialist lenders focus more on your exit strategy and security than credit history.
Read more: Can you get a bridging loan with bad credit?
Yes, using equity from another property is common. The property must have sufficient equity to meet the lender’s security requirements.
A second charge bridging loan could be used to access the equity when a main mortgage is already in place.
With a deposit and all documentation ready, bridging loans can complete in 5-10 days.
Read more: How quickly can you get a bridging loan?
Yes, many lenders accept gifted deposits, but you’ll need clear documentation showing the gift’s source and confirmation it’s not repayable.
Yes, larger deposits equate to lower LTV which will often secure better interest rates as they represent lower risk to lenders.
Some lenders might consider lower deposits for applications with very strong exit strategies, particularly from experienced borrowers.
Read more: Successful strategies for repaying a bridging loan
Individual bridging deals always need a deposit, although it doesn’t need to be cash from your bank account.
Experienced borrowers will know how to leverage equity in other property and assets.
A simple way to use another owned property is by using a cross-charge bridging loan. This allows the lender to take a legal charge over the new property and a legal charge over another property you own, that has enough equity.
You can then get 100% funding, with no cash money down.
