Eligibility for Bridging Finance Rates UK
Unlike other types of short-term debt, cheap bridging loans are less focused on your income or salary than on the property's value.
The lending is secured against the asset you are buying, so your income is not a crucial factor - a high-value property and a stable exit strategy are the critical criteria to secure the best bridging loan offers.
What is the Maximum you can borrow?
The value you can borrow through closed bridging loans depends on the property, your deposit, and how much security is available.
Most of the best bridging loan providers don't have an upper limit on what they can lend, and some bridge finance for large commercial projects can be to the value of several million pounds.
Again, the exit strategy is key to securing open bridging loans. If you can demonstrate a surety that you can repay the lending in full and on time, you will be able to obtain a higher-value bridge loan at more competitive rates.
Bridging Finance Rates
You can expect to pay a higher interest rate on the best bridging loan than against long-term lending such as a mortgage.
These cheap bridging loans are available for a limited amount of time and repaid on an interest-only basis with the capital paid back through your exit strategy - such as achieving a mortgage.
Given the short-term nature of bridge loans, the interest charge bridging loans rate is calculated by the month rather than per annum. Typical interest rates on the best bridging loan products are around 0.4-2%.
This can make it tricky to compare to other lending, often expressed as an APR. As an example, cheap bridging loans charging 1.5% interest per months' work out as an 18% APR.
There are different ways that interest on cheap bridging loans is charged:
- Monthly interest - you pay the interest due every month and repay the original loan amount at the end of the loan term.
- Rolled up interest (or deferred interest) - you don't make regular monthly payments but repay the whole of the borrowing plus the interest incurred at the end of the loan term.
- Retained interest - you pay the interest at set intervals, with interest owed added to the amount you are borrowing.
Bridging Finance Fees
As with any form of finance, there are fees payable when you compare cheap bridging loans - and it is essential to understand what these are. Costs on the best bridging loan product include things like:
- Administration fees
- Arrangement fees
- Exit charges
- Legal Fees
- Broker Fees
- Valuation fees
Fees can make a big difference to the cost of the best bridging loan- a lender might offer a lower interest rate, but with substantial charges that will make it more expensive than a slightly higher interest offer. This is why you need to compare bridging loans and see whether all of these fees are applicable to your situation.
For example, if you borrow a £100k secured loan, paying 1% charges on both the arrangement fee and the exit charge will cost you £2,000 in addition to the interest payable for cheap bridging loans.
If you need help understanding the best bridging loan fees, or how different lending rates directly compare to each other, give us a call, and we will be happy to help you understand which deals are the most cost-effective overall.
Deposit Requirements to Get the Best Bridge Loan Financing Rates
Most cheap bridging loans will finance up to 75% of the value of the property - some will cap this at as low as 50-60%. You can also access 100% LTV financing, although this will usually require additional security and collateral from the best bridging loan provider.
Usually, a minimum deposit of 30-35% is needed to purchase a property through a cheap bridging loan.
If you are looking for the best bridging loan to help you invest in a property and have a lower deposit available - or don't have a deposit - give us a call, and we will be happy to help!
Revolution Brokers work with a vast network of UK lenders and can find exclusive deals from the best bridging loan lenders to help your investment plans move forward.
Comparing Bridging Finance Rates UK
Understanding how offers on cheap bridging loans compare can be tricky - and with terms, rates and offers expressed in different terminology and on different bases, it can be almost impossible to know which is the best bridging loan for you.
Some of the best bridging loan lenders publish comparison tables, but these are approximations and do not always accurately present the best options. Quite often, they are written to highlight a particular product and will omit any details that make this offer seem more costly.
The only sure-fire way to know that you are achieving the best rates and have full transparency over the costs of the bridging loans is to use a professional finance broker
Brokers are independent, and so can provide a professional recommendation as to which products offer you the best value for money and present the best bridging loan deal.
Finding Cheap Bridging Loans UK
Interest can change fairly quickly, and the best bridging loan lenders might offer different rates of interest. The important thing is to be able to compare cheap bridging loans directly - so if you are comparing an APR with a monthly interest rate, you need to know the direct comparison to understand which is the best bridging loan cost.
Revolution Brokers work with the whole of the UK lending market, with unrestricted access to cheap bridging loans and rates. We negotiate as an advocate on behalf of our clients, to achieve terms not available on the open market.
Eligibility Criteria for Cheap Bridging Loans
There are lots of different criteria the best bridging loan lenders will assess before they can make an offer. These include:
Exit strategy
The more robust your plan to repay the borrowing, the easier it is to secure cheap bridging loans. The exit strategy is more important than any other factor, and you need to be able to demonstrate how you will repay the loan at the time you apply for any of the best bridging loan deals.
Credit rating
Your credit rating shows potential lenders how creditworthy you are, and form part of their risk assessment against cheap bridging loans. If you have an adverse credit history, you may find that some of the best bridging loan lenders are not willing to lend to you. Others may lend but at higher interest rates and fees.
Funding purpose
Your lender will always want to know what you plan to do with cheap bridging loans. If your plans involve a development, they will need to know how experienced you are in this sector, and have access to your business plans.
If your plans are clear, well researched, and provide a stable profit margin, one of the best bridging loan lenders is likely to be more assured that the project is safe to invest in, and that you will be able to repay your borrowings on time.
Security
the security is the collateral a lender takes against your property or another asset, to ensure that if any unforeseen circumstances occur, they will be able to reclaim their debt outstanding on cheap bridging loans.
If your property is in a prime location and highly sellable, this will provide robust security that a lender can be confident offering cheap bridging loans or a personal loan with a fixed repayment date.
Deposit value
The higher the deposit you have available, the lower the LTV you are borrowing at and the more competitive the rates you are likely to be offered on the best bridging loan products.
Most of the best bridging loan property purchases require at least a 30-35% deposit, but if you have a deposit available of 40% or more, you will achieve the best rates on the market.
Finding the best bridging Loan Financing Rates for Limited Companies
By and large, the interest rates offered on cheap bridging loans to companies are similar to any other type of borrower.
Lenders consider a commercial bridging loan application as the same type of financing as a company. They might ask for personal guarantees from the company owners and Directors as an added layer of security before they can offer the best bridging loan rates.
Special Purpose Vehicles (SPVs) are a type of limited company incorporated solely to manage the ownership and trading associated with investment properties, often used to improve the prospects of securing the best bridging loan deals.
Applications from an SPV company are likely to be more widely accepted and attract more favourable terms from providers of cheap bridging loans.
Cheap Bridging Loan Rates UK in London
In most aspects of finance, London tends to be the most expensive location in the UK. However, when it comes to cheap bridging loans, the rates tend to be very similar to elsewhere, so you wouldn't expect to pay significantly more.
Some lenders do carry minimum values that they will consider, against both the loan amount and the property value, in which case lower value property acquisitions are unlikely to be accepted for the best bridging loan agreements.
There are also specialist lenders working on high-value cheap bridging loans that concentrate their work in the capital, where properties are of a sufficient value to meet their minimum thresholds.
Cheap Bridging Finance for Different Property Types
Most cheap bridging loans are taken out to finance the purchase of a property or land. They are also available for other types of property including commercial, semi-commercial and residential.
Different lenders focus on different sectors, so if you are looking for the best bridging loan for a specific type of property, contact Revolution Brokers, and we will point you in the right direction to finding a lender who has experience in your property market.
The criteria the best bridging loan lenders will look at vary in order of importance depending on the type of property, but will always include:
- The stability of your exit strategy.
- How good your credit rating is.
- The value and security of the property.
- Your experience as a developer or landlord.
- How much deposit you have available.
Bridging Finance Rates on Commercial Property
When purchasing a commercial property, you might expect to pay higher interest rates than for a residential property even on cheap bridging loans. As with any bridging finance application, your exit strategy is vital.
Some of the best bridging loan lenders exclude particular types of property, and some only lend cheap bridging loans against residential premises, so commercial cheap bridging loans are a more niche area and one where we strongly recommend using an experienced broker to secure the best deals.
Commercial bridging loans tend to be capped at 50-60% LTV which means that you will need to have a good deposit and a robust business plan to secure a competitive lending offer on cheap bridging loans.
Alternative Options to Bridge Loan Finance Rates
There are other ways to secure the best bridging loan funding if you need finances to assist with property investment. These include:
Ideal for buy to let investors needing a fast turnaround mortgage to expand their property portfolio. Buy to let mortgages can be in place in just a couple of weeks – similarly to cheap bridging loans.
This mortgage option allows you to release equity from an existing property, and to use those funds as a deposit to take out a new mortgage on an investment property instead of applying for cheap bridging loans.
If you own a business, you can release capital from your assets - such as stock, machinery, property or debtors. This type of financing is often more cost-effective than cheap bridging loans but will depend on your type of business and the value of your assets.
Business loan brokers are experts in cheap bridging loans, working with our network of lenders across the UK specialising in bespoke financing solutions to meet every need.
For help understanding the best bridging loan lending solutions for you, and which are the best bridging loan products for you, get in touch at [email protected]
